View from the Observation Deck

1. The chart above represents the price movement of the S&P Utilities Index over the past 5 years.
2. While the price value of the index declined by a total of 4.0% over the 5-year period, its average annual total return was 3.3%.
3. All of the total return came from the reinvested dividends.
4. Due to the high level of volatility in the equities markets in 2011, holding defensive positions such as utility stocks has served investors well.
5. The S&P Utilities Index posted a total return of 16.0% through the first 11 months of this year, compared to a gain of only 1.1% for the S&P 500, according to Bloomberg.
6. In our opinion, if the European Union crafts a credible stabilization plan for Greece, and any other member country in need, the case for being defensive could vanish.
7. What investors need to know is that Standard & Poor's is forecasting a 2012 earnings growth estimate of 0.16% for the S&P Utilities Index – essentially no growth.
8. The S&P 500's estimated earnings growth target is 10.55%. The disparity in performance noted in point #4 could begin to dissipate as quickly as flicking a light switch.
9. So while utility stocks are among the few shining stars of 2011, we believe investors will hit the dimmer switch in 2012...assuming a fix is found in Europe.