One step ahead! Which industry will lead the market if interest rates are lowered?

Last week's non-farm payroll report fell significantly below expectations, causing the global market to experience the baptism of 'Black Monday', and there are even expectations of a 50 basis point rate cut in September. Furthermore, combined with selling pressure in the technology sector and a resurgence of expectations for a rate cut in the US, there is the possibility of a rotation in the US stock market.What investment strategies should investors take as a rate cut approaches? There is the possibility that the rotation will continue.Will market correction and buying opportunities coincide with the rate cut approaching?

If there is no recession, the stock market will normally rise.In an economic expansion, there may be a period of give and take in the 1-3 months after a rate cut.If there is no economic downturn, it will then turn to an upward trend.It will likely turn upward again afterwards.Because there is a high chance that the first rate cut will take place in September, considering the year-to-date increase in major indices,there is a possibility of entering a consolidation phase.Furthermore, the first rate cut may coincide with the volatile prelude of the US presidential election.In the case of a soft landing, stocks tend to show strong performance in the 6-12 months after a rate cut.For investors, the cumulative rate cuts and the reassurance towards the end of the year after the election,will be reasons to increase their buying during the upcoming months of adjustment.it will be.

Looking at the sector performance of the US stock market during past rate cutsutilities industry、Health Care、Telecom Services、Financial、Necessities of lifeDefensive sectors such as finance, necessities of life, etc., tend to show good performance.

One that showed the best performance throughout the rate-cut cycleHealth care sectoris. One of the main reasons why healthcare stocks stand out in the rate-cut cycle isHaving resilient demand not impacted by economic cyclesIt is a defensive stock. In addition, many healthcare stocksdividend stocksand at the same timeknown for their large share buybackswhich makes them extremely attractive during an economic downturn. Additionally,small-cap stocks in the Russell 2000outperform large-cap stocks in the first 1-3 months after the initial rate cutin a rowEven over a 6-12 month periodGenerated returns equivalent to or close to the S&P 500Furthermore, the entire information technology sector showed a back and forth movement in the months after the rate cut.

This year, another sector to watch in the rate cut phase isutilities industryamidst a "severe crash" in US stocks, utility stocks attracted funds, moving against the tide of the stock market crash, becoming one of the few bright spots.

The S&P500 index, after reaching its all-time high of 5,667.20 points on July 16, entered into a technology stock correction and dropped 7.5% to 5,240.03 points by August 6. However, looking at the performance of each sector,Utilities stocks rose 4% during this period.and The highest performance among the sectors of the S&P500 index.Indicated.

During market turmoil,Utility stocks are often considered a safe haven.Regardless of the economic conditions, utilities such as water, electricity, gas, and telecommunications are essential in daily life.Essential for everyday life.is because it provides stable profits and dividends, which are less affected by market fluctuations.● On the macroeconomic front, the weak July non-farm payrolls and gradually rising unemployment rate, combined with the lower-than-expected July ISM Manufacturing PMI, have increased concerns about a slowdown in the US economy. As a result, the market generally expects a rate cut in September, and the yield on 10-year Treasury bonds has fallen to about 3.8%. Therefore, the income from utility stocks becomes even more attractive.due to the sharp increase in electricity demand caused by the AI boom.

● On the macroeconomic front, the weak July non-farm payrolls and gradually rising unemployment rate, combined with the lower-than-expected July ISM Manufacturing PMI, have increased concerns about a slowdown in the US economy. As a result, the market generally expects a rate cut in September, and the yield on 10-year Treasury bonds has fallen to about 3.8%. Therefore, the income from utility stocks becomes even more attractive.for utility stocks due to the attractive dividend income.It happened.

● On the other hand, the sharp increase in electricity demand caused by the AI boomdue to the sharp increase in electricity demand caused by the AI boom.Also, it pushed up the shares of public utilities companies in the United States. Last Tuesday, in the electricity market auction held by PJM, the largest electricity transmission network operator in the United States, the price of electricity soared to $269.92 per megawatt per day, an increase of over 800% compared to the previous year, surpassing the previous record of $174.11 per megawatt set in 2010.