From Morningstar: 2024-09-12 13:14:00

The Federal Reserve is expected to cut interest rates for the first time since the pandemic began, likely by a quarter of a percentage point, easing inflationary pressures for investors. However, the impact of the cut remains uncertain, with debate over a potential half-point decrease and its effects on the market.

Stocks historically perform well after interest rate cuts, but each cycle is unique. Market performance post-rate cuts varied significantly in the past, influenced by factors such as economic conditions and Fed attitudes. Analysts caution against assuming a predictable pattern and advocate a nuanced approach to navigating the current landscape dominated by tech stocks.

Market volatility is expected as the Fed embarks on a rate-cutting cycle amidst economic slowdown concerns. Uncertainty abounds over the potential outcomes, from a soft landing to a recession, leading investors to hedge their portfolios with defensive stocks, REITs, and rate-sensitive sectors. Analysts recommend preparing for both scenarios and considering smaller-cap stocks for potential outperformance.



Read more at Morningstar: What Happens to Stocks When the Fed Starts Cutting…