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The Fed's rate cut decision has been released. In today’s article, we highlighted the impact of the rate cut on the market, collect the future path of fed from big banks. And listed the potential investment opportunities that investors should pay attention to.

1. The Fed's unexpected rate cut, market reaction and expert interpretation

On September 18, Eastern Time, the Fed opened a new round of easing cycle with a 50 bps rate cut and a dovish dot plot. Rate cuts are generally aimed at reducing borrowing costs and stimulating economic growth, especially when economic growth slows or there is a risk of recession. The Fed's 50 basis point rate cut is the largest single rate cut since the global financial crisis in 2008.

However, Powell's colleague reminded that "the speed of future rate cuts can be fast, slow, or even suspended", which made the market feel "chilled". This move quickly triggered a sharp reaction in major markets, with U.S. stocks $S&P 500(.SPX)$ , $NASDAQ(.IXIC)$ $DJIA(.DJI)$ closing down and U.S. bonds rising sharply.

After the announcement of the rate cut, the three major U.S. stock indexes jumped, with the $NASDAQ 100(NDX)$ rising more than 1%, the $S&P 500(.SPX)$ once setting a new record high, and small-cap stocks soaring nearly 2.5%.

U.S. Treasury bonds surged, and yields collectively fell. Rate cuts will reduce the yields of newly issued bonds, thereby increasing the prices of existing bonds, especially long-term bonds.

The $USD Index(USDindex.FOREX)$ sharply during the FOMC statement, but rebounded all the way during Powell's speech. U.S. Treasury yields also rebounded, with long-term yields rising 7 basis points that day.

Gold prices $Gold - main 2412(GCmain)$ soared to a record high of $2,600. On the one hand, as a non-interest-bearing asset, gold becomes more attractive when interest rates fall. On the other hand, it also shows that the market is cautious about the low interest rate environment and potential inflation risks.

At the same time, crude oil $WTI Crude Oil - main 2411(CLmain)$ prices showed a volatile trend, and then fell back when Powell spoke…

Several investment banks have stated that there will be more rounds of interest rate cuts in the future.

Read more>> Fed Rate Cut: How Wall Street Interprets the Development @Capital_Insights

2. US equities performance and Sectors Winners Aftre Fed Rate Cut

In an environment of interest rate cuts, the performance of the stock market is usually boosted. Historical data shows that the $S&P 500(.SPX)$ is generally rising, with only pessimistic performance in the two years after the Internet bubble in 2001 and the global financial crisis after 2007.

Read more>> Historical SPX. Returns Over 6M, 1Y & 2Y After The First Rate Cut

From the perspective of specific industries, the borrowing costs of enterprises have been reduced, which should theoretically help improve corporate profitability, especially those industries with high debt or interest rate sensitivity, such as real estate and utilities.

According to historical statistics, investors can focus on the following industries and sectors during the interest rate cut cycle: healthcare, finance, and communications services.

Read More>> 💰Fed Cuts & S&P 500 11 Sectors: A Historical Review

• Healthcare industry: Reducing the financing costs of healthcare companies will increase corporate profits, thereby improving the industry's price expectations.

  Related ETFs to watch: $Health Care Select Sector SPDR Fund(XLV)$ , $iShares Biotechnology ETF(IBB)$

• Financial industry: Increased loan demand offsets net margin compression, related ETFs to watch: $Financial Select Sector SPDR Fund(XLF)$

• Real estate industry: Lower mortgage rates stimulate real estate market activities, related ETFs to watch: $Real Estate Select Sector SPDR Fund(XLRE)$ , $Vanguard Real Estate ETF(VNQ)$

• Consumer staples industry: Product demand is relatively stable and is not affected by economic cycles. Related ETFs to watch: $Consumer Staples Select Sector SPDR Fund(XLP)$

• Technology industry: Technology stocks may be less sensitive to interest rate changes, and a low interest rate environment is generally beneficial to high-growth technology stocks because they can borrow at a lower cost to fund expansion and innovation.

  However, if the market expects an economic slowdown, technology stocks may be under pressure. Related ETFs to watch: $Technology Select Sector SPDR Fund(XLK)$ , $Invesco QQQ(QQQ)$ r

3. Investment opportunities in gold, and U.S. bonds

Read more>> Gold, Bonds, & Commodities Returns After Rate Cut

Bonds investments:

Rate cuts directly push up bond prices, especially medium- and long-term government bonds. Investment-grade corporate bonds also perform well in a rate cut environment because lower interest rates reduce corporate financing costs and improve their debt repayment ability. Historically, during the Fed's rate cut cycle, the 10-year U.S. Treasury yield usually shows a significant decline, which pushes up bond prices. Investors usually increase their allocation to the bond market in anticipation of rate cuts in order to seek stable returns.

If you are interested in U.S. bonds, you may consider ETFs：

• $iShares 20+ Year Treasury Bond ETF(TLT)$ is an ETF that tracks the price and yield of long-term U.S. government bonds. It holds U.S. Treasury bonds with a maturity of more than 20 years, so it is very sensitive to interest rate changes. It is suitable for investors who want to seek longer-term bonds in the bond market.

• $Vanguard Intermediate-Term Treasury Index ETF(VGIT)$ is a medium-term Treasury ETF that tracks the price and yield of medium-term U.S. Treasury bonds. Holding US Treasury bonds with maturities of 3 to 10 years has relatively small price fluctuations compared to long-term Treasury bonds. It is more suitable for investors who want to balance the risks of long-term and short-term Treasury bonds.

• $Direxion Daily 20 Year Plus Treasury Bull 3x Shares(TMF)$ is a 3x leveraged ETF that tracks the price and yield of 20+ year US Treasury bonds. When the 20+ year US Treasury bond rises by 1%, TMF is expected to rise by about 3%.

Read more>>

• 📈👔👨‍🏫Interest rates benefit with TLT 4% capital gain and 0.3% dividend yield monthly @Optionspuppy

• Trade U.S. Treasuries with Diagonal Spreads as Fed eyes rate cuts @OptionsAura

• Strategy to Go Long on US Treasuries as Powell "Hints" at Rate Cut

Gold invests Tips:

As a safe-haven asset, gold tends to perform strongly after interest rate cuts. Interest rate cuts reduce the opportunity cost of holding gold, while also increasing expectations of inflation, which supports gold prices. During the interest rate cut cycle from 2008 to 2011, the price of gold rose from about $700 per ounce to nearly $1,900 per ounce, an increase of more than 170%. For other commodities, such as crude oil, their price trends depend more on global economic growth and supply and demand. Interest rate cuts may boost economic activity, thereby increasing demand for commodities such as oil.

The most direct way is to trade futures, $Vanguard Mega Cap ETF(MGC)$ $Gold - main 2412(GCmain)$ $USD Gold Futures - main 2410(GDUmain)$, currently Tiger App supports futures trading, but if you haven't opened futures trading, you might as well take a look at gold ETF investment

Gold ETF is an ETF that tracks the fluctuations of gold spot and futures. Buying this type of ETF is equivalent to buying gold spot itself. Generally, when gold in the spot market falls, the ETF that is long on gold will fall

• $SPDR Gold Shares(GLD)$ This is one of the largest gold ETFs in the world, tracking the spot price of gold (London gold). GLD holds physical gold as an asset support, providing investors with a convenient way to invest in gold. It is the most liquid of all gold ETFs, with a huge daily trading volume, suitable for right-side trading.

• $iShares Gold Trust(IAU)$ Similar to GLD, IAU is also an ETF that holds physical gold and aims to track changes in gold prices. It provides a low-cost, highly liquid gold investment option.

In addition to gold ETFs, there are gold mining ETFs---used to track a basket of gold mining companies (the market value-weighted average of gold mining companies)-such companies include both gold miners and gold processors.

• $VanEck Gold Miners ETF(GDX)$ Long Gold Mining Index NYSE Gold Mining Index, this ETF tracks the market value-weighted index of global gold mining companies listed on the NYSE and NASDAQ. The main tracked commodities include gold accounting for 85.30%, rare metals accounting for 10.26%,

• $VanEck Junior Gold Miners ETF(GDXJ)$ $Long Gold Mining Index (Small Cap Companies) NYSE Gold Mining Index, this ETF tracks the market capitalization-weighted index of global gold and silver mining companies. It is an ETF that tracks junior gold mining companies. These companies usually have smaller market capitalizations and higher growth potential. Gold accounts for 72.93% and rare metals account for 14.86%.

• $Direxion Daily Gold Miners Index Bull 2X Shares(NUGT)$ , tracking index: NYSE Arca Gold Miners Index (GDM), also known as the NYSE Gold Mining Index, tracks the world's "large" gold and silver mining companies, including Gold Corp, Newman Mining, Barrick Gold, etc. $Direxion Daily Gold Miners Index Bear 2X Shares(DUST)$ tracks the same as $Direxion Daily Gold Miners Index Bull 2X Shares(NUGT)$ , but in the opposite direction, 2x short.