5 Utility Stocks To Buy Amid Global Economic Slowdown

A steep decline in manufacturing activity and a downtrend in global economic growth has been bothering investors for a long time now. This had dampened investors’ sentiment making them rush toward safe haven assets like utilities.

However, this sector, which is investors’ least favorite in a positive market scenario, has a stable outlook for 2020 from Fitch. 

Factors Boosting Utilities

Utilities are known to be a defensive sector for its stable demand in times of market gyration. The stocks are a safe haven for investors when stock markets are suffering from economic slowdown and trade jitters.

Recently, investors have been hedging their investments, anticipating possible outcomes from U.S.-China trade negotiations. But that is not the only thing bothering investors. The global economy is slowing down and the manufacturing sector, in particular, is bearing the brunt. In fact, the U.S. manufacturing output dropped for the third consecutive month in October.

GDP has contracted in major European economies since the beginning of 2019 and scars are visible in Britain and Germany. Economic growth in the two economic giants, the United States, and China has been slow, due to their existing trade tussles.

In fact, several analysts and economists are worried that the U.S.-China trade war and Brexit can rupture consumer confidence that has been driving economic growth. Another factor that keeps the tension fueled is that inflation normally picks up with economic activity. This means that while interest rates should rise, geopolitical tension and weak economic data have compelled central banks to cut benchmark rates.

The Federal Reserve has cut rates three times consecutively and is thus burdening the nation with debt. Some countries in the Eurozone have made deeper rate cuts into negative territory and restarted cash injections. In short, they are adding to the existing high level of debt that originated form the past decades’ financial crisis.

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