One of the writers for The Wall Street Journal’s popular “Heard on the Street” column recently wondered whether utilities’ outstanding performance last year–the Dow Jones Utilities Average gained nearly 26% in 2014–could be repeated this year.

To be sure, it’s rare for utilities to put up these kinds of numbers in the short term. Instead, they tend to produce modest, but steady gains over time, while doing a superior job of holding their value during downturns. But in the period since the Global Financial Crisis, utilities have rewarded income investors with two individual calendar years during which they beat the broad market by sizable margins–2011 and 2014.

And we believe there are a number of factors that could lead the sector to have another strong year.

But while utilities have enjoyed an enviable run, classic value-investing analysis indicates there are still many undervalued opportunities, which we’ll review below.

Of course, it was no coincidence that utilities produced their best gains last year during the fourth quarter, when the collapse in crude oil prices, prompted by concerns about global growth, caused a flight to safety toward utilities, treasuries and corporate bonds.

And the strengthening U.S. dollar has also made almost all U.S. fixed-income investments especially attractive to Europeans and other overseas investors who are trying to preserve wealth in the face of deflationary conditions. Further, investors were anticipating stimulus programs in Asia and Europe that will likely push rates even lower.

In fact, rates on government debt around the world have crashed in the last few days, making U.S. investments that much more alluring. However, even U.S. treasury yields are on the decline as the whole world simultaneously pursues a risk-off approach.

According to Bloomberg, “Investors are paying European governments and Japan to keep their money for years, turning the debt world on its head and underscoring the deepening gloom over global growth.”

On Jan. 14, the yield on the five-year German government bond fell to a record-low close of negative 0.016%, according to Tradeweb. The yield on the five-year government bond in Finland fell below zero for the first time on record, to negative 0.08%. In Switzerland, the seven-year government bond yield tumbled below zero for the first time ever, to negative 0.027%.

U.S. treasury yields have also dropped due to heavy buying by global investors. On Jan. 14, the benchmark U.S. 10-year Treasury note fell to 1.833%, the lowest level since May 2013. The yield on the 30-year Treasury bond dropped to 2.450%, the lowest closing level on record.

When treasuries fall, utilities tend to outperform.

Indeed, boutique research house Wolfe Research told the WSJ that since 1980 utilities have tended to beat the market over the 12-month period after the yield on the 10-year fell by more than 1 percentage point.

Furthermore, the voracious appetite for fixed-income will continue to push yields down on investment-grade corporate debt, which will make utilities that much more attractive.

Chart A: Corporate Bond and Treasury Yields See Heavy Declines

Source: YCharts

Meanwhile, with the prospect of slower global growth and the absence of inflation, many analysts expect the Federal Reserve to make only a modest move when it finally raises rates later this year. And if current conditions persist, a small increase in short-term rates may have little effect on market dynamics or equity-income investments.

There’s also concern that slowing global growth could be a drag on the U.S. recovery, a risk that the Fed noted last year. And while the strong dollar is a plus for overseas investors, it could lead to price deflation at home, which could harm the recovery. A strong dollar also makes U.S. products less competitive overseas, and more and more companies are deriving a majority of their earnings from global markets.

Put all these factors together, and 2015 is shaping up to be another year in which utilities are highly sought-after investments.

A New Valuation for a New World

Some analysts believe that macroeconomic changes, such as the historically low interest rates that have prevailed since the Global Financial Crisis, warrant a higher valuation for utilities.

For instance, Credit Suisse analyst Dan Eggers has been arguing that 17 is the new 12.5–a reference to utility sector price-to-earnings (P/E) ratios.

In a research note published a few years ago, Eggers wrote, “Japan’s decades of ultra-low interest rates saw its utilities eventually rise in price to the point where yields were just 0.5 to 1.5 percentage points higher than 10-year Japanese bonds. U.S. utility yields remain 2.1 percentage points higher than the 10-year Treasury yield,” Eggers observed at the time.

Certainly, utility yields have been consistently higher than the yield on the 10-year Treasury over the last few years, but I would argue that this new dynamic will persist only as long as central banks around the world continue to stimulate their economies–or putting it another way, as long as weak global growth continues.

To be sure, there are very few U.S. utilities trading near a P/E of 12.5. But I believe a higher benchmark valuation–perhaps as high as the P/E of 17 that Eggers advocated–is warranted based on utilities’ ability to provide income in environments of heightened volatility, weak growth and historically low interest rates.

And I am in the process of developing various valuation models that will provide subscribers with insights into which utilities will likely perform best in what could be a volatile year for equities.

In the meantime, for subscribers of Utility Forecaster, the full article shows which utilities are still significantly undervalued.