Upside for global equities as US Federal Reserve prepares for September rate cut

Sep 2024

Zeus Investments has confirmed its optimistic outlook for global equities, forecasting significant upside potential as the US Federal Reserve signals its readiness to cut interest rates in September 2024. The firm’s analysts believe that the anticipated rate cut will serve as a catalyst for market growth, particularly benefiting sectors that have been sensitive to higher borrowing costs.

Expecting positive momentum

The expected rate cut, which would mark the first since the 100 basis point cut the Fed implemented as part of its response to the economic impact of the Covid-19 pandemic in March 2020, is expected to stimulate economic activity by reducing the cost of borrowing for businesses and consumers. Zeus Investments believes that this policy shift will reignite investor confidence, leading to renewed interest in equities, especially in growth-oriented sectors such as technology, consumer discretionary, and industrials.

"The Federal Reserve’s upcoming decision represents a significant turning point for the markets," said George Zhu, CEO at ZEUS Investments. "With inflation showing signs of moderation and the labor market stabilizing, we believe that a rate cut will provide the necessary support for economic expansion, ultimately driving equity markets higher in the last quarter of 2024."

Key sectors

Zeus Investments identified several sectors that are likely to benefit from the anticipated rate cut. Technology companies, which have historically been sensitive to interest rate changes, are expected to see a boost as lower rates reduce the discount applied to future earnings, making these stocks more attractive to investors. Additionally, consumer discretionary stocks are poised for gains as lower borrowing costs encourage consumer spending.

"Growth stocks, particularly in the technology sector, are well-positioned to capitalize on a more accommodative monetary policy. Indeed, we’re already seeing markets beginning to price in the expected rate cut and one or two more," added Mr. Zhu. "We also expect sectors tied to consumer spending and housing to experience a rebound as lower interest rates improve affordability and purchasing power."

Maintaining risk vigilance

While Zeus Investments is bullish on the near-term prospects for equities, the firm also emphasizes the importance of maintaining a balanced approach to risk management. The firm advises investors to stay diversified and to consider the potential impact of any unexpected economic developments or geopolitical events that could affect market dynamics.