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Cramer: Worst performing S&P sector of 2016

Now that the market has officially entered the second half of the year, Jim Cramer took a moment to review the single worst sector in the S&P 500 — the financials, some of which report on Thursday.

"The financials were far and away the worst performing sector in the S&P 500 … that matters because the financials represent nearly 16 percent of the S&P," the "Mad Money" host said.

Many investor hopes were dashed this year with financial stocks. In December, the Federal Reserve raised interest rates for the first time in eight years, with the expectation that it would raise four more times in 2016. That would have been very positive for the banks, which earn money from customer deposits as the Fed tightens.

More than six months later, there have been no rate hikes and it is unclear if the Fed will act again soon because of global economic uncertainty





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"The financials were just plain bad, which is exactly what you would expect in an environment with low rates and few deals." -Jim Cramer

Interest rates continue to plummet, with the yield of the 10-year Treasury falling to less than 1.5 percent at the end of June. It is down from 2.25 percent at the beginning of the year. Trading volumes in investment banking are also significantly lower than last year, and there have been far fewer IPOs and mergers.

"In terms of actual financials, only the insurance companies managed to put on a decent performance. That is why when you look at the five best performing financials in the S&P, they're not what most people would even consider financials," Cramer said.

The top performing financial were real estate investment trusts with big yields. That was an indication to Cramer that investors were crowding into safety stocks. They were Iron Mountain, Digital Realty Trust, Realty Income Corp, Ventas and Equinix.

The worst performers displayed just how much the sector was in pain. The weakest performer was Legg Mason, followed by Invesco, Citizens Financial Group, CBRE Group and Charles Schwab.

"The financials were just plain bad, which is exactly what you would expect in an environment with low rates and few deals," Cramer said.


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