Cramer, a prominent host on CNBC, discussed the Dow Jones Utility Average on Wednesday. He noted that the recent rally in this index may suggest a slowing economy and lower interest rates. Utilities have been performing well in a slowing economy for years, and their sustained rally indicates that a slowdown is imminent.
The Dow Jones Utility Average comprises 15 major utility stocks and has been steadily climbing since April 16. While utilities are not traditionally market leaders, they tend to perform better during economic downturns as consumers must continue to pay their bills. Additionally, utilities rely heavily on issuing debt to support their operations, especially as they expand to accommodate growing demand for data centers. Despite the need for borrowing, Cramer emphasized that interest rates are not rising, which is good news for these stocks.
Cramer highlighted that signs of an economic slowdown have been emerging for weeks. The rise in utilities further supports this notion, especially considering Federal Reserve Chair Jerome Powell’s comments in April suggesting fewer interest rate cuts than expected. As utilities are a reliable indicator of market conditions, their steady rally suggests that a slowdown may be imminent.
In conclusion, Cramer advised investors to pay close attention to the utilities sector as an economic trend barometer. The sustained rally in utility stocks coupled with Powell’s commentary could signal an upcoming economic slowdown.
