FOMC preview: How might a potential rate cut reshape investment landscape?

The Fed’s rate decision on Sept 18 is important, with potential cuts of 25 or 50 bps likely having predictable impacts. A 25 bps cut would signal a cautious approach, leading to modest stock gains, slight drops in bond yields, and a weaker dollar. A 50 bps cut, on the other hand, would indicate strong economic support, potentially causing a more significant stock rally, a notable decline in bond yields, and further weakening of the dollar.

Assets that typically perform well during rate cuts include tech and consumer discretionary stocks, REITs, utilities, long-term Treasuries, and gold. For example, $Apple (AAPL.US)$ and $Amazon (AMZN.US)$ may benefit from lower borrowing costs and increased consumer spending, while REITs like $American Tower Corp (AMT.US)$ and utilities like $NextEra Energy (NEE.US)$ could gain from reduced financing costs.

Long-term Treasury bonds like $Vanguard Long-Term Treasury ETF (VGLT.US)$ and gold could also see increased appeal as yields fall and the dollar weakens.

Regardless of the potential impact of rate changes, my strategy will remain consistent. I focus on solid stocks with a long-term perspective and will continue to use options for hedging my investments.

Disclaimer: Community is offered by Moomoo Technologies Inc. and is for educational purposes only. Read more

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