Is a rate cut really coming? The market bets that the probability of the Federal Reserve cutting rates in September is 100%. What investment opportunities will there be?
@jace0777 ：
（RoR：54.76 %, Winning Rate 84.13%，statistical time ：16 July,2022to July 22, 2024）
***Is a Rate Cut Coming?
Absolutely! A rate cut come September is almost a sure bet, with odds surging to well over 90%. The top drivers? Slower progress on lowering inflation and the enduring strength of the U.S. labor market. Fed Chair Jerome Powell’s dovish comments suggest the Fed won't wait for inflation to hit 2% before acting, acknowledging the lagging effects of previous rate hikes. As famed economist John Maynard Keynes once quipped, "When the facts change, I change my mind." With the market now confident in an imminent cut, stock indexes like the Nasdaq and S&P 500 are already celebrating, hitting new highs. Multiple times this year! 🌋
***What Investment Opportunities Are There?
With a rate cut on the horizon, I’d make a few strategic shifts on my portfolio. I’ll eye key growth stocks (especially in tech; I like it) and dividend-yielding equities. Stocks like Apple (AAPL) and Microsoft (MSFT) could see significant benefits. Also, lower rates make long-term bonds and high-yield bonds attractive, while REITs and the housing market stand to gain from reduced borrowing costs. So ETFs in these domains will start to become attractive. Just to be on the safe side, I’ll include gold and silver-related tickers as hedges against economic shifts. In essence, diversify wisely, keep nimble and keep an eye on emerging markets for some extra zest! 🍋
@Wilson Tan ：
（RoR：103.78% , Winning Rate 74.32%，statistical time ：June 28, 2022 to July 22, 2024）
Due to the lower-than-expected June CPI in the US, it seems almost certain that there will be an interest rate cut in September. Typically, lower inflation and the expectation of a rate cut by the Federal Reserve would be beneficial for the stock market. However, I am not optimistic about the market for the following reasons:
1: Before and after the Fed cuts interest rates, the liquidity of the US dollar usually becomes tight because investors flock to buy US Treasury bonds.
2: The US stock market has already priced in the expectation of an economic "soft landing" and the anticipated rate cuts. For the stock market to continue rising, the Federal Reserve would need to cut rates eight times by the end of 2025, totaling 200 basis points, which seems highly unlikely.
3: Rate cuts are invariably accompanied by a slowdown in the economy and a decline in corporate profitability. The mismatch between valuations and growth rates is also a bearish factor for the stock market.
4: During the rate hike cycle, a significant amount of dollars flowed back into the US, with a small portion entering the real economy, leading to higher inflation. However, the majority of funds went into the US stock market, particularly into the "Magnificent 7" stocks. These stocks rallied together during the rate hike period. When the dollar trend reverses, these stocks are likely to fall as this cohesion breaks apart. This is why investors have recently been shifting from large-cap tech stocks to small-cap stocks.
In the future market, I will focus on investment opportunities in gold and cryptocurrencies, shifting my attention from large-cap tech stocks to small-cap stocks.
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