The Fed akan menurunkan suku bunga! Saham mana yang paling menguntungkan dalam tren pasar kali ini?

18 September, Federal Reserve announced a 50 basis point cut in the federal funds rate to 4.75%-5.00% range, marking the first rate cut since March 2020. The market erupted—some anticipate a new bull market, others worry about economic recession. So here’s the question: Is rate cutting good news or a trap for the stock market? How will different industry stocks perform?

Why cut rates now?

Simply put, the economy is a bit sluggish. The unemployment rate rose continuously from 3.80% in March to 4.30% in July, triggering a “recession warning.” Manufacturing PMI has stayed in contraction territory for five consecutive months, and the Federal Reserve even downgraded this year’s GDP forecast from 2.1% to 2.0%.

The core logic of rate cutting actually comes down to five points: Economic slowdown needs stimulus, deflation needs to be offset, financial market instability requires liquidity, external pressures need buffering, and special situations (pandemics, disasters) need emergency relief. This Fed rate cut is mainly to give the weak labor market and manufacturing economy a shot in the arm.

What does history tell us?

According to Goldman Sachs macro strategists’ data, since the mid-1980s, the Federal Reserve has implemented 10 rate-cutting cycles. The key point is: When rate cuts successfully prevent economic recession, stock markets typically rise; when rate cuts fail to prevent recession, stock markets often fall.

Here are some real cases:

2001-2002 Internet Bubble: Federal Reserve cut rates aggressively, but the tech bubble was too deeply rooted. NASDAQ crashed from 5048 to 1114 (dropped 78%), S&P 500 fell from 1520 to 777 (dropped 49%). The rate-cut remedy didn’t work.

2007-2008 Financial Crisis: Subprime crisis erupted, banks collapsed, credit froze. S&P 500 plummeted from 1565 to 676 (dropped 57%), Dow Jones plunged from 14164 to 6547 (dropped 54%). Even with rate cuts, they couldn’t block the financial tsunami.

2019 Preventive Rate Cut: This is a success story. The Federal Reserve spotted global economic slowdown signals and moved preemptively. Market confidence surged, corporate earnings stabilized, tech stocks strengthened, and trade tensions eased. Result: S&P 500 gained 29% for the year (from 2507 to 3230), NASDAQ gained 35% (from 6635 to 8973).

2020 Pandemic Emergency Rate Cut: S&P 500 fell from 3386 to 2237, then the Federal Reserve intervened, cutting rates to 0-0.25%, launching quantitative easing. Liquidity flooded in, tech companies benefited, vaccine hopes boosted confidence. Finally S&P 500 rebounded to 3756 (up 16% for the year), NASDAQ up 44%.

Who benefits most in the 2024 rate-cut rally?

Based on historical rate-cut cycles’ sector performance comparisons, different boards are affected completely differently:

Tech stocks are most flamboyant: Performed mediocrely during 2001 rate cuts (-5%), but surged 25% in 2019 rate cuts, and soared 50% in 2020. Why? Low rates increase the present value of future tech company earnings and lower financing costs, spurring R&D and expansion. When economic recovery signals become clear, tech stocks take center stage.

Financial stocks are mixed: Rising interest rate compression causes net margin pressure initially, squeezing bank profits, down 40% in 2007-2008. But once economic recovery expectations heat up, financials flip, gaining 15% in 2019. This sector reads the economic cycle’s mood.

Healthcare and Consumer Discretionary are stable: These two sectors show steady growth across every rate-cut cycle. Consumers find borrowing cheaper and spend more willingly, good news for both. Consumer discretionary surged 40% directly in 2020.

Energy stocks are most willful: Most volatile performance, from 9% in 2001, 5% in 2019, to -5% in 2020. Energy is both cyclical (more activity=more demand) and hostage to oil prices and geopolitics.

Will there be more rate cuts this year?

Fed Chair Powell stated in late September that there’s no rush for rapid rate cuts, possibly two more cuts by year-end, totaling 50 basis points. Markets expect the November and December FOMC meetings to each cut 25 basis points. In other words, two more upside windows remain before year-end.

The pros and cons of this rate-cut game

Advantages: Borrowing gets cheaper, consumption and investment active up, debt-laden households and enterprises reduce interest expenses, financial system has ample liquidity, risks relatively relieved.

Disadvantages: Can easily lead to overconsumption and over-investment triggering inflation, asset prices easily form bubbles, long-term encouragement of over-borrowing may accumulate financial risks.

Currently the market broadly favors a “soft landing” (economic slowdown without recession), but must also watch for variables like energy costs, port strikes, geopolitical conflicts. Per latest surveys, 60% of investors are bullish on US stocks for Q4, 59% favor emerging markets.

Core Conclusion: Whether rate cutting is good depends on whether the economy can achieve a soft landing. If successful, tech stocks and consumer stocks dance first; if not, all stocks fall. In the current rate-cut rally, paying attention to economic data is king.