Core Insights - The utility sector has experienced its strongest performance in over 15 years, achieving a seventh consecutive month of gains, driven by short-term demand and structural tailwinds [1][3]. Performance of Utility ETFs - Reaves Utilities ETF (UTES) led the sector with an 8.6% increase in July, followed by Invesco Dorsey Wright Utilities Momentum ETF (PUI) at 6.8%, Invesco S&P 500 Equal Weight Utilities ETF (RSPU) at 6%, and both First Trust Utilities AlphaDEX Fund (FXU) and Fidelity MSCI Utilities Index ETF (FUTY) at 5.4% each [2]. Factors Driving Growth - Surging power demand due to extreme heat in the U.S. has increased residential power consumption, alongside a significant rise in electricity usage from AI training, data centers, and electric vehicle charging. Electricity demand is projected to grow by approximately 55% from 2020 to 2040, compared to just 9% in the previous two decades [3]. - Utilities serving major tech clients like Amazon, Microsoft, and Meta are entering infrastructure deals funded by these companies, with American Electric Power (AEP) expecting 28% earnings growth by 2028 and Entergy projecting 13% annual industrial sales growth [4]. Rate Increase Requests - Utilities have submitted around $29 billion in rate increase requests for the first half of 2025, nearly double the amount from the previous year, driven by rising wholesale costs and the need for infrastructure investments [5]. Defensive Investment Appeal - Investors are shifting towards utilities as a defensive investment amid market uncertainty, attracted by consistent dividend payouts and regulatory oversight that ensures predictable earnings [6]. Industry Fundamentals - The utility sector benefits from a growing population, increasing demand for essential services like water, gas, and electricity, and the rising adoption of electric vehicles, which will further boost electricity demand [7]. ETFs Overview - **Reaves Utilities ETF (UTES)**: Actively managed ETF with $740.7 million AUM, charges 49 bps in fees, and holds 22 stocks [8]. - **Invesco Dorsey Wright Utilities Momentum ETF (PUI)**: Focuses on 34 companies with relative strength, has $75 million AUM, and charges 60 bps in fees [9]. - **Invesco S&P 500 Equal Weight Utilities ETF (RSPU)**: Offers exposure to 33 equal-weighted companies, has $447.7 million AUM, and charges 40 bps in fees [10]. - **First Trust Utilities AlphaDEX Fund (FXU)**: Holds 40 stocks with $1.7 billion AUM, charges 63 bps in fees [11]. - **Fidelity MSCI Utilities Index ETF (FUTY)**: Tracks 67 utility stocks with $2 billion AUM and charges 0.08% in fees [12].

Economic Overview - The U.S. economy added only 73,000 jobs in July, significantly below the expected 104,000, with downward revisions in May and June erasing a total of 258,000 jobs, marking the largest two-month revision since May 2020 [1] - The unemployment rate increased to 4.2%, aligning with forecasts but remaining near historic lows [1][2] Market Reactions - Wall Street analysts are reassessing their economic forecasts due to the disappointing July jobs report, indicating a potential loss of strength in the labor market [2] - Following the weak labor market data, market expectations for a Federal Reserve interest rate cut in September surged to 80%, up from 38% the previous day [3] Federal Reserve Insights - Leslie Falcone from UBS Global Wealth Management anticipates the Fed will begin cutting rates in September, with a total of about 100 basis points in consecutive cuts [4] - Fed officials had previously expressed concerns about labor market softness, which now appear to be validated [5] Trade Tensions - Recent escalations in trade tensions, including a surprise 39% tariff on Switzerland by President Trump, have added to investor uncertainty, catching markets off guard [6] Investment Strategies - In light of economic uncertainty, investors are advised to consider defensive exchange-traded funds (ETFs) that may provide stability [7] - Specific ETFs mentioned include: - Invesco QQQ Low Volatility ETF (QQLV), which tracks low volatility stocks within the Nasdaq-100 Index and charges 25 basis points in fees [8] - Cullen Enhanced Equity Income ETF (DIVP), focusing on large-cap, dividend-paying companies with a yield of 7.31% and charging 55 basis points in fees [9] - S&P 500 Dividend Aristocrats ETF (NOBL), targeting companies with a history of increasing dividends for at least 25 years, charging 35 basis points in fees [10] - First Trust Utilities AlphaDEX Fund (FXU), designed to identify stocks from the Russell 1000 Index that may generate positive alpha, charging 63 basis points in fees [11][12] - US Aerospace & Defense iShares ETF (ITA), measuring the performance of the aerospace and defense sector, charging 40 basis points in fees [13]