Here’s why BTIG says they would be ‘patient buyers’ after big Fed rate cut By Investing.com

Investing.com — The Federal Reserve’s massive rate cut has priced in some assets but not the rest of the market, according to analysts at BTIG.

The Fed cut interest rates by 50 basis points to a range of 4.75% to 5.0% on Wednesday and indicated it would announce further cuts this year, signaling the start of an easing cycle aimed at supporting the economy after a prolonged struggle against economic growth. inflation. Rates were previously at a more than two-decade high for more than a year.

Along with the first cut since March 2020, an updated “dot plot” of officials’ policy forecasts showed that policymakers now expect the key funds rate to fall to 4.25% to 4.5% by end of 2024. This would suggest either another jumbo. rate cut of half a point or two cuts of less than a quarter point at the Fed’s two remaining meetings this year.

In a note to clients on Friday, analysts said that heading into the long-awaited Fed decision on Wednesday, “much of the expected rate cut has been fed into markets.”

However, they said that while this was the case “for bonds, the dollar and defensive stocks, it clearly wasn’t” for other parts of the market, particularly technology and discretionary sector names.

The resulting appetite for riskier assets helped boost the benchmark, which hit a record high on Thursday.

Ahead of the event, BTIG strategists had warned there could be a “false breakout” that could see “a ‘sell the news’ reaction” among investors.

But, analysts said, “the fake eruption (…) clearly did not occur.”

“Do we think some consolidation is still warranted? Yes. Is the weakness likely to be more moderate than we initially thought? Yes. Therefore, we would be patient buyers, but respecting the breakout until proven otherwise,” they added.

In terms of specific sectors, BTIG strategists said they remain “cautious” on consumer staples, “would begin to reduce energy exposure” and “note software hitting new highs after seven months of consolidation “.