"Third edition of ""rate cut trade""! Seize the opportunity to invest in essential goods with expectations of economic durability!"
At the annual symposium held at Jackson Hole, Chairman Powell stated, "I have deepened my conviction that inflation is following a sustained path to the 2% price target. The time has come to adjust policy." This statement convinced the market that the rate cut will begin at next month's Federal Open Market Committee (FOMC) meeting.
The Federal Reserve Board's monetary policy is shifting from tightening to easing.Central banks around the world are transitioning from tightening to easing.In the midst of a new cycle where central banks around the world are cutting interest rates and starting monetary easing, which assets are becoming more attractive for investment?
Amid lingering uncertainties about the economic outlook, stock investors are shifting funds to stocks expected to withstand an economic slowdown.
According to a report released by Goldman Sachs at the beginning of the year,The second-best performing market sector at the start of rate cuts was the 'consumer staples' sector,which is traditionally classified as a 'defensive sector' that is less affected by economic fluctuations and known for its stable performance.
Looking at the performance of major US retailers in the current quarter, it was found that sales of low-priced goods are increasing, and consumers are being cautious with their spending. The revenue for the May-July 2024 period announced by the major retailer on the 15th exceeded market expectations, with a 5% increase from the same period last year to $169.3 billion, leading to an upward revision of its full-year performance outlook. Company executives stated that there are no signs of weakening demand. $Walmart (WMT.US)$employee" Norikazu" It was announced that the revenue for May-July 24 increased by 5% to 169.3 billion dollars compared to the same period last year, surpassing market expectations and raising the full-year performance outlook. Executiv Goodman Retail Corp.
The consumer staples sector of the S&P500 has risen 6% since August and is up 16% year-to-date.
$Consumer Staples Select Sector SPDR Fund (XLP.US)$They have risen nearly 16% year-to-date and reached their all-time high. The sector as a whole has shown strong performance this year.
In the consumer staples sector, major retailers $Walmart (WMT.US)$, $Costco (COST.US)$and tobacco giants $Altria (MO.US)$, $Philip Morris International (PM.US)$, a major consumer goods company in the UK, $Unilever (UL.US)$, a major consumer goods company in the US, $Colgate-Palmolive (CL.US)$, a major beverage company, $Coca-Cola (KO.US)$, a major consumer goods company in the US and Japan, $Kimberly-Clark (KMB.US)$, $Procter & Gamble (PG.US)$ have all reached record highs this year, recording year-to-date increases of 17% to 46%.
In addition to essential stocks, related ETFs in the same sector are also worth noting. Currently, the top five essential goods ETFs with the largest assets in the US stock market are, $Consumer Staples Select Sector SPDR Fund (XLP.US)$, $Vanguard Consumer Staples ETF (VDC.US)$, $iShares Europe ETF (IEV.US)$, $Ishares U.S. Consumer Goods Etf (IYK.US)$, $Fidelity Covington Trust Msci Consumer Staples Index Etf (FSTA.US)$It has shown an increase of 11% - 16% year-to-date.
Consumer staples refer to essential items such as food and beverages, pharmaceuticals, clothing, and daily necessities that support people's everyday lives. Regardless of the economic situation, people are less likely to reduce spending in these areas. In terms of investment, the consumer staples sector, like the financial and healthcare sectors, is considered a defensive asset with high resistance to downturns.
Furthermore, the start of an interest rate cut is a positive factor for consumer staples stocks. The reasons are as follows:
● Cost reduction
With the interest rate cut, companies can lower their cost of capital raising, alleviate the financial pressure in production and operation, and increase profitability.
With the interest rate cut, companies can lower their cost of capital raising, alleviate the financial pressure in production and operation, and increase profitability.
● Growth in demand
● Impact of a weak US dollar
If the interest rate cut leads to a weaker US dollar, there is a possibility that the prices of export goods to the US will rise. As a result, there may be potential investment in the US essential household goods sector, which provides stable returns even in an unstable economic situation.
If the interest rate cut leads to a weaker US dollar, there is a possibility that the prices of export goods to the US will rise. As a result, there may be potential investment in the US essential household goods sector, which provides stable returns even in an unstable economic situation.
This article utilizes automatic translation for certain parts.
Source: moomoo, Bloomberg, Nikkei newspaper
- moomoo News Vicky
Source: moomoo, Bloomberg, Nikkei newspaper
- moomoo News Vicky
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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