ETFs: Your steering wheel to "drive" profits after rate cut!
Hey mooers! ![]()
On last Wednesday, the Federal Reserve reduced its benchmark interest rate by a significant half-point, the first such easing since 2020.
Following the initial 50bp rate cut, fears of a short-term economic recession might arise, making it crucial to watch upcoming economic data closely. If indicators like initial jobless claims are better than expected, chances for a stable economic recovery improve. Rate cuts could also boost U.S. stocks and other assets sensitive to interest rates. Read more>>
According to Nomura, value stocks typically outperform growth stocks three months following a 50bp cut. ![]()
Post-rate cut, the large-cap value ETF sector soared to record highs during trading sessions, with several including $Vanguard Value ETF (VTV.US)$, $EAFE Value Index MSCI Ishares (EFV.US)$, $Spdr Series Trust Spdr Portfolio S&P 500 Value Etf (SPYV.US)$, and $Ishares Russell Top 200 Value Etf (IWX.US)$ reaching new historical peaks.
How can I find related ETFs? Check out our past post about the feature Investment Style>>
But to put it simply, here's the path: Market Page → ETF tab → Each Market tab → Investment Style ![]()
Which sectors will be affected?
Based on market expectations, previous articles introduced several sectors affected by rate cuts. Let's briefly review them.
At moomoo, we have ETFs with interest rate cut themes, which can help reduce investment risks by indirectly investing in sectors that benefit from interest rate cuts: go to Moomoo> Markets> ETF> Thematic ETFs> Fed Rate cut Beneficiaries ETF.
How to Trade During a Rate Cut?
Fixed Income Assets: U.S. Treasury bonds may have temporarily peaked due to conservative Fed rate cut expectations for 2024 and 2025, but they retain value as cuts continue. Holding $iShares 20+ Year Treasury Bond ETF (TLT.US)$ with a covered call strategy or buying $iShares 20+ Year Treasury Bond BuyWrite Strategy ETF (TLTW.US)$ is recommended. If the economy remains strong and further rate cuts are successful, the need for more cuts may decrease, leading to a gradual shift away from U.S. Treasuries.
On moomoo, you can find detailed information on U.S. Treasury Bond ETFs by navigating to Markets>ETF>Thematic ETF>U.S. Treasury Bond ETF. Clicking on a specific ETF will allow you to view details such as holdings, dividends, and assets under management (AUM).
Index Assets: In the near term, small-cap indices like the Russell 2000 $iShares Russell 2000 ETF (IWM.US)$ are likely to be more responsive due to their heightened sensitivity to interest rate changes, potentially leading to better performance. Over the long term, however, large-cap indices such as the S&P 500 $Vanguard S&P 500 ETF (VOO.US)$ are anticipated to demonstrate more stable performance.
Find them in ETF> Index ETFs
Safe-Haven Assets: As rate cuts progress, the decline in U.S. Treasury yields will lead to a depreciation of the dollar, benefiting safe-haven assets such as gold and Bitcoin.
Some mooers also shared their strategy about this rate cut. Let's see>>
@CNNT: Amid recession fears, bad policies, and abundant hot money globally, the rate cut sparks volatility. My defensive strategy: 50% high-dividend stocks, 25% covered call ETFs, 25% cash for unforeseen opportunities. >>read more
How to grab the next opportunity?
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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Dart Board Picks : I am a firm believer in "Rational Expectations" and if recession fears are talked about in the media and by the fed it will become self fulfilling. People will spend less expecting a downturn.
I really like real estate and materials right now to get in early. Energy seems to be undervalued and given demand from data centers and LNG plants hungry for nat gas might not be a bad place to out some capital
73279472 : i