9 stocks that could benefit from a Fed rate cut | Wilnesh News

The S&P 500 and Nasdaq extended their record gains this week after lower-than-expected consumer inflation data on Wednesday morning. While the entire stock market could benefit from a rate cut by the Fed, several names in CNBC’s Investment Club portfolio — from real estate to autos to biotech — could get a real boost. Connecting the dots: May’s consumer price index is released before Wall Street opens – just hours before the Federal Reserve wraps up its two-day June policy meeting. The consumer price index has remained unchanged month-on-month for several months in a row, suggesting that inflation will not be so easily eliminated. Federal Reserve Chairman Powell emphasized at the post-meeting press conference that further progress is still needed in reducing inflation before cutting interest rates for the first time. The Federal Reserve finally kept interest rates stable again this time. While central bankers look to inflation to help determine the appropriate level of borrowing costs, it is important to consider how these factors (inflation and interest rates) affect consumers’ purchasing power. Inflation is the rate at which prices rise over time. Interest rates are related to the cost of funds. Inflation tells you what’s happening in terms of sticker prices, while interest rates determine whether borrowers can afford to purchase big-ticket items like cars and homes that usually require some kind of financing agreement. Housing Due to its connection to the housing market, we believe Stanley Black & Decker is a major beneficiary of the Fed’s rate cut. This isn’t because lower interest rates make the tools cheaper (you generally don’t need to finance power tools), but because it drives consumers to go out and buy the tools. What’s spurring demand is big-ticket purchases, namely housing. Cheaper mortgages and lower prices will boost home buying. That means more residential construction, which will bring more professional side business to Stanley. More homeowners also means more potential buyers purchasing the tools needed to fix things around the house and start renovation projects. This home formation dynamic should also provide incremental boost to companies like Best Buy and discount retailer TJX through its HomeGoods and HomeSense brands. After all, once you buy your new home, you’ll probably need to decorate it. That’s TJX. You may also be looking at home electronics and appliance upgrades. That’s Best Buy. Both retailers may also see people willing to spend more as they borrow less (with less interest) on larger purchases, leaving more discretionary money in their pockets Dollar. Banks When it comes to financing, we have to consider the banks that actually provide the loans. However, the benefits of lower interest rates are unclear. For one thing, lower interest rates mean banks like Wells Fargo make less money lending money. But on the other hand, Wells Fargo is likely to increase lending as borrowing demand increases. While we’ll have to see how it offsets interest income, we think increased borrowing demand and stronger economic activity bodes well for banks. Ultimately, a healthier economy with money flowing is a good thing. Another of our financial stocks, Morgan Stanley, has also been hurt by rising interest rates as many clients move cash in search of higher yields. As interest rates move lower, we should see some dynamic reversal. Morgan Stanley also has a strong investment banking business, and lower interest rates will help increase initial public offering (IPO) underwriting demand as well as merger and acquisition fees. Biotech Danaher should also see some benefits, as lower interest rates improve financing dynamics for biotech companies. A shrinking biotech funding following the collapse of Silicon Valley banks has hampered demand for Danaher’s biologics portfolio. SVB is a major source of funding for biotech companies. Therefore, as venture capital returns and more biotech companies seek to go public, we should see increased demand for biologics. Automotive Another portfolio winner is Ford. For most people, buying a car means borrowing money at a given interest rate and paying it back over a few years. Just like housing, monthly payments become more manageable at lower interest rates, so affordability and demand will increase. Ford has been shedding money-losing all-electric vehicles and putting more resources into high-margin hybrids. Monthly sales figures prove the wisdom of this strategy. Any help on the price front, making cars more affordable, can provide a boost to a business that’s already moving in the right direction. Enterprise Palo Alto Networks stands out on the enterprise side. In recent quarters, the cybersecurity giant has said its customers — companies large and small — have been looking to adjust payment terms due to higher financing costs. While not a demand issue, we will certainly see a change in tone and tempo around deals and deal sizes as businesses feel better about lower borrowing costs. Salesforce also highlighted more cautious trading activity but may not benefit as much from lower rates. We’re still trying to figure out how much of a headwind this is from financing rates, and customers are realizing they can achieve similar results by leveraging generative AI tools from Salesforce competitors like Microsoft. (See here for a complete list of stocks in the Jim Cramer Charitable Trust.) As a subscriber to Jim Cramer’s CNBC Investing Club, you will receive trade alerts before Jim makes his trades. Jim waits 45 minutes after sending a trade alert before buying or selling stocks in his charitable trust portfolio. If Jim talked about a stock on CNBC TV, he would wait 72 hours after issuing a trade alert before executing the trade. The investment club information above is subject to our Terms and Conditions and Privacy Policy and our Disclaimer. No fiduciary duty or obligation shall exist or arise upon your receipt of any information relating to the Investment Club. No specific results or profits are guaranteed.

Stanley Black & Decker power drills are on display for sale at a Home Depot store in Colma, California.

David Paul Morris | David Paul Morris Bloomberg | Getty Images

this S&P 500 Index and Nasdaq Stocks extended their record gains this week after lower-than-expected consumer inflation data on Wednesday morning. While the entire stock market could benefit from a rate cut by the Fed, several names in CNBC’s Investment Club portfolio — from real estate to autos to biotech — could get a real boost.

About The Author

admin

See author's posts

About The Author

admin

Leave a Reply Cancel reply

Related News

People Also Read