When the Federal Reserve cuts interest rates, it changes the investing landscape. Assets with higher return potential see more money as borrowing becomes cheaper and cash earns less. Rate cuts don’t guarantee strong market gains, but winners and losers emerge across asset classes.

Lower rates benefit the bond market, pushing up prices of existing bonds with higher interest. Intermediate and longer-duration bonds benefit the most. Diversified bond funds can lock in yields and stabilize portfolios during rate cuts due to economic slowdown.

Growth stocks in sectors like technology can thrive as borrowing costs drop. Companies can invest more, lifting valuations with lower discount rates on earnings. Performance in rate-cut cycles depends on economic conditions; selective exposure is key for investors.

Housing sector sees benefits with falling rates. Mortgage rates decline, improving affordability and boosting activity in the housing market. Lower financing costs benefit homebuilders and related businesses, reducing pressure on margins and supporting demand.

Income investors face shrinking yields from cash and bonds when rates drop. Dividend-paying stocks become more attractive, especially large companies with stable cash flows and reliable dividends. Value-oriented stocks may also benefit from lower borrowing expenses and improved margins.

Real estate investment trusts (REITs) respond positively to falling rates due to lower borrowing costs and more appealing dividends. Certain REIT segments like data centers and healthcare properties historically perform well in shifting rate environments. Sustainability matters more than headline yields in REIT investments.

Read more at Yahoo Finance: Should You Buy These 5 Investments When Interest Rates Drop?