Utility stocks have been a rare bright spot amid the recent huge volatility in the U.S. stock market.

The utilities sector has been the best performer since the S&P 500 hit an all-time high on July 16, rising 4% while the overall index is down about 7%. This year relies on the fact that the utilities sector has risen more than 15%, a gain close to that of the technology sector (17%) and the communication services sector (18%).

Recent market expectations of a Fed rate cut have caused a significant decline in U.S. Treasury yields, with the 10-year Treasury yield dropping from nearly 4.5% at the beginning of July to the current 3.9%, which has put highly dividend-paying utility stocks in favor with investors seeking stable passive income. The utilities industry currently yields 3.15% in dividends, higher than the S&P 500's 1.7%.

Goldman Sachs analysts said on Monday that defensive investments like utility stocks usually outperform during the three-month period around the start of a rate cut.

In addition, the development of AI and its widespread use this year has led to an increase in demand for electricity, which has also provided significant upside momentum for utility stocks.