Fed Alert: If Rates Fall, These Are 3 Stocks That Will Rise

The Federal Reserve is unlikely to cut interest rates next week, but Wall Street anticipates a September discount. Investors expect a lot to begin an easing cycle, with more Fed rate cuts materializing in 2024 and 2025. Stocks have rallied recently on this anticipation as investors price in what this will mean for stocks (typically higher rates lower multiples lead to higher stock multiples). market). The Fed aims to cut rates to achieve a soft landing, cooling inflation and market speculation without causing major job losses or a recession. We’ll have to see if that actually comes to fruition.

Of course, if the Fed is successfulfull, stocks could go up from here. Anastasia Amoroso from iCapital recently RECORDED stocks typically rise before the first rate cut, consolidate for a few months, then rise again in the absence of a recession. That’s the big question right now – will we see how the “r” word pans out or not?

Many investors prefer defensive stocks in this environment, and this view makes sense. However, for those willing to bet on interest rate falls, here are three interest-rate-sensitive names that could rise the most if we do indeed get the rate cuts the bond market is pricing in and avoid a recession.

Key points about this article:

• Interest rate cuts look set to hit the market shortly, but the question is which companies could benefit the most from this change in monetary policy.
• Here are three stocks that I think are well-positioned to take advantage of the new era of monetary easing we could be heading into.
• If you are looking for action with huge potential, be sure to grab a free copy of ours brand new “Next NVIDIA” report.. It has a software stock where we are sure it has 10x potential.

JPMorgan Chase (JPM)

A JPMorgan sign in front of what appears to be the company’s headquarters

JPMorgan Chase (NYSE:JPM) is a complex pick for interest rate cut plays. While lower borrowing costs could reduce profitability, the bank could benefit from increased business volume. JPMorgan shares, recently supported by a 46.1% earnings surprise in Q2it now trades at 3.8 times sales, up from 3.2 times last year. Analysts expect sales to rise 17.7% to $176.1 billion in fiscal 2024, making the stock attractive to those optimistic about economic conditions.

As a megabank, JPMorgan’s revenue streams are relatively well diversified. The company should see significant growth from net interest margins as the yield curve continues to flatten. Capital markets activity (new IPOs) should also heat up. But the big question is whether these rate cuts will be for the right reasons – if we’re headed for a recession, the reduction in consumer spending and debt issuance could be a net negative for banks. Again, we’ll have to see.

That said, for investors looking for financial exposure, JPMorgan remains the gold standard in this space. In my opinion, those looking for exposure to a top financial institution should definitely consider JPM stock as their top option right now.

Shopify (COMMON)

The Shopify logo on what appears to be the side of a corporate office wall

Shopify (NYSE:SHOP) is among the best pure-play e-commerce stocks on the market. The company provides a platform that allows merchants to set up online businesses. The Shopify platform is aimed at small and medium-sized businesses, but its market share has grown among big-cap names as well.

Now, Shopify’s stock price has been beneficial and underperforming lately. SHOP stock has dropped nearly 20% year-to-date but up 79% in five years. Investors saw very good performance from SHOP stock until the end of 2021, when the stock faced challenges, with only 30 out of 51 analysts consider it a “buy.”

The current consensus price target on SHOP stock is $76.20, with CIBC’s Todd Coupland recently setting a higher target of $85. Following a positive Report of the first quarter 2024Shopify’s president praised the company’s strong performance and future growth.

The market anticipates that Shopify will show year-over-year earnings growth higher revenues for Q2 2024. The stock’s movement will depend on whether actual results meet or exceed those expectations. Management’s discussion of business conditions will be key to understanding the impact on future earnings and stock performance.

Super Micro Computer (SMCI)

A woman working on her laptop in front of a server farm

Super Micro Computer (NASDAQ:SMCI) has faced market volatility, falling 40% from its March peak of $1,188. Despite a recent dip to less than $500 per share, the company’s strategic expansions and strong financials suggest future growth. Indeed, this is a top growth stock that could be a buying opportunity for investors who may have felt they missed out on the previous rally. Broader market concerns such as potential US export restrictions to China and geopolitical tensions with Taiwan have weighed on major chip stocks, and Super Micro is no different.

Super Micro is ramping up production with the addition of three new facilities to meet growing demand for AI and direct liquid cooling solutions. The company’s liquid-cooled data centers are expected to grow from under 1% to 30% of installations in two years. During this period, Super Micro is expected to capture a significant market share. Strategic partnerships with Nvidia and AMD enhance Super Micro’s competitive position in the server and storage market, enabling faster delivery of advanced technology.

Decide whether to buy Super Micro before al Q2 profit ratio it can be a tough call. But my view is that long-term investors may want to focus on SMCI’s valuation rather than waiting for it to drop. SMCI stock currently trades at just 14 times forward earnings, making it an excellent buy with strong upside potential. Whether purchased now or after the report, it is likely to be a worthwhile long-term investment in my opinion.

The post Fed Alert: If Rates Fall, These Are 3 Stocks That Will Rise appeared first on 24/7 Wall St.