Electricity stocks: Ready to bounce?

Electricity stocks offer an attractive entry point because interest-rate pressure has compressed valuations just as earnings growth and potential M&A support are improving.

• The US utility index fell 14.4% and the S&P Global Clean Energy Transition Index declined 29% from early June to September 2026 as long-term bond yields rose.
• Redwheel's analysis found only a moderate negative correlation of -0.4 to -0.3 between its Global Renewables Infrastructure Strategy and interest rates over five to ten years.
• Across six rate peak and trough events between December 2015 and August 2026, the strategy returned 10% on average six months after rate peaks, versus an average decline of less than 2% after troughs; after the October 2023 US 10-year yield peak at 4.99%, it gained 10.4% in six months and 26.9% in twelve months.
• US utilities' earnings revisions have accelerated over the past year, while Iberdrola targets at least 10% annual earnings growth through 2030 and NextEra at least 9% through 2035; forward valuations have nevertheless moved near ten-year lows.
• Redwheel identifies Ormat, Northland Power, Algonquin, ERG, Drax, Solaria, Scatec and Renova as potential acquisition targets, noting an average premium of 42% across a sample of recent take-private transactions and strategic catalysts such as geothermal expansion, data-centre demand and battery storage.

Takeaway: Investors may find an attractive sector entry point near a rate peak, but the thesis fails if the US 10-year yield rises toward 5.5% or 6.0%, which could trigger further valuation pressure.