Interest rates are expected to fall. Adjust your fixed income assets
The Fed’s high interest rate regime – currently with a target range of 5.25% to 5.5% – has rewarded investors who put cash in money market funds and high-yield certificate deposits, but that spree is coming to an end.
Once the Fed lowers interest rates, the high yield on cash will decline, which means investors should reallocate some of their funds to longer-dated bonds.
Medium-term bonds allow investors to lock in currently higher yields while mitigating the risk of wild interest rate-related price swings.
CNBC Pro subscribers can Read the full story here.
–Dara Mercado
CNBC Pro: The stock market’s historical performance since the Fed’s first rate cut
With the Federal Reserve expected to cut interest rates for the first time in four years on Wednesday, it’s time to look at how stocks performed at the start of previous easing cycles.
Historical data shows that the stock market’s historical performance after the Federal Reserve’s first rate cut depends largely on the economy. Overall, across all cycles, the S&P 500’s performance after the first rate cut has been largely positive, but there have been some big misses during downturns.
CNBC Pro subscribers can Read the full story here.
—Sarah Min
These are the most attractive dividend stocks ahead of the Fed’s rate cut cycle
There are some high dividend stocks – including some energy companies such as Exxon Mobil and ConocoPhillips – With the Federal Reserve expected to begin cutting interest rates, investors can take advantage of strong upside potential.
Lower interest rates should make yields on dividend stocks more attractive, boosting the group. These stocks can also serve as a reliable hedge against any economic slowdown should central bankers end up falling behind the rate-cutting curve.
Using the CNBC Pro Stock Screener tool, we searched for stocks with dividend yields above 3% and debt-to-equity ratios below 60%. As a result, their dividends are generous and their debt load is low, meaning they should be able to continue paying their dividends. Analysts said they also expected to see upside of 10% or more.
Click here View the results and create your own screener on CNBC Pro’s Stock Screener Tool. read full story On CNBC Pro.
— Pia Singh
Here are some stocks that would do well in the event of a Fed rate cut but no recession
Many investors are betting that the Fed will be able to avoid a recession by easing monetary policy from current levels.
Against this backdrop, CNBC Pro has identified stocks that would do well if the Fed cuts rates but the economy doesn’t slip into recession. Some of the names that were eliminated were Nike, Amgen and UnitedHealth.
CNBC Pro subscribers can read the full article List here.
— Fred Ambert
More than just a rate cut: What to expect from the Fed’s decision
Traders are eagerly awaiting the Federal Reserve’s interest rate decision – the conclusion of the central bank’s two-day meeting promises to be fascinating.
The Federal Reserve is expected to cut interest rates for the first time since 2020, but the market is divided on whether policymakers will cut interest rates by 25 basis points or 50 basis points. One basis point is equal to one hundredth. Currently, the Fed’s target interest rate range is 5.25% to 5.5%.
Wall Street will also delve into the Fed’s “dot plot,” where policymakers share their expectations for interest rates in the coming years. At the end of the meeting, central bank officials will also release a summary of their economic forecasts, which will include forecasts for gross domestic product and inflation.
Read more from CNBC’s Jeff Cox on what investors can expect from the Fed.
–Dara Mercado
This is what consumer interest rates will look like when the market expects the Fed to cut rates
The Federal Reserve is expected to cut interest rates for the first time on Wednesday after more than two years of tightening monetary policy. The current target interest rate range of the central bank is 5.25% to 5.50%.
Rising interest rates have been a problem for borrowers, with the 30-year fixed mortgage rate rising to 6.12% as of the week of September 13, according to Daily Mortgage News. This figure is higher than the 4.29% in the week of March 11, 2022, before the Federal Reserve began to raise interest rates for the first time.
Home equity loans have also become more expensive, with interest rates rising to 8.49% as of last week, compared with 5.96% in March 2022, according to Bankrate. Bankrate found that credit card interest rates have also increased by more than 400 basis points since the Fed began raising interest rates, rising to 20.78% as of last week. One basis point is equal to one hundredth of one percent.
However, the Fed’s tightening policy offers a glimmer of hope for savers. Haval said the annual interest rate on five-year certificates of deposit has jumped to 2.87% from 0.5% in March 2022. Harvard found that money market fund yields also rose sharply, to 0.46% last week, compared with 0.08% before the Fed began tightening policy in March 2022.
— Darla Mercado, Nick Wells
Uncertainty grows over the extent of the Fed’s possible rate cuts ahead of its decision
In the hours leading up to the Federal Reserve’s rate decision, investors remained divided over how much policymakers would cut rates.
There is a 55% chance that central bank officials will cut interest rates by 50 basis points, according to trading in federal funds futures. CME Group Fed Watch Tool. They also mean there is a 45% chance that the Fed will cut interest rates by 25 basis points. Currently, the Fed’s target interest rate range is 5.25% to 5.50%. One basis point is equal to one hundredth.
Aditya Bhave, senior U.S. economist at Bank of America, said investors should focus on their own aspirations. The firm expects a 25 basis point rate cut on Wednesday and warned that a 50 basis point cut could ultimately be a worrying sign.
“Risk assets are likely to rise initially on the back of this dovish surprise,” Barfe wrote on Wednesday. “But we would caution investors that a 50 basis point rate cut means the Fed is less confident of a soft landing.”
— Dara Mercado
