Our experts are preparing for what’s next

Why 25 vs. 50 basis points isn’t so important… two sectors in Eric Fry and Thomas Yeung’s view… Luke Lango’s ‘Tech Reversal’… Louis’ new pick Navellier

Wall Street is grappling with the size of the rate cut we’ll get a week from Wednesday.

Will it be 25 or 50 basis points?

While it’s tempting to look at the impact in a million different ways, Eric Fry’s senior analyst Thomas Yeung offers some valuable, grounded insight:

The most important aspect of today’s economy is not the difference between a 25 and 50 basis point cut in the base rate. In fact, no one will remember this figure until October!

Instead, it’s more important to view any rate cut in September as the moment the US economy moves from an early to mid-expansion stage.

A similar message comes from our hypergrowth expert Luke Lango. As he sees it, the problem isn’t a quarter point or two, it’s the sequence of cuts that are on the way:

Sure, a rate cut won’t do much to unlock the housing or auto markets. It will neither revive consumer spending nor create significantly better lending conditions. But there will be 10 rate cuts. And that’s exactly what we think will happen next year…

In rate cut cycles, the Fed often likes to cut the Fed Funds rate to at least the rate of inflation. With inflation at 2.5%, that means the Fed will likely cut the Fed Funds rate from 5.25% to around 2.5% over the next year. That means at least 10 rate cuts – which is roughly what the futures market is pricing in for the path of rates over the next year and change…

These 10 Discounts Will Defrost the Housing and Auto Markets. They will revitalize the construction and manufacturing industries. They will make it much easier to borrow money and pay off debt. They will reactivate consumer spending. They will force consumers to make large purchases.

They will make a difference.

So what do our training experts do?

Starting with Thomas and Eric, two of the sectors targeted are technology and healthcare. Thomas notes that both will be beneficiaries of rebounds in the middle.

Here are more:

These two industries feature firms with high upfront R&D costs that eventually generate low-cost revenue streams (think blockbuster drugs and chip factories). Lower interest rates benefit these companies by giving them lower borrowing costs.

Thomas goes on to highlight a study by Fidelity that finds the IT sector typically outperforms the market by an annualized rate of 15% during mid-stage recoveries. Healthcare is doing 7% better.

Back to Thomas:

Rate reductions during these periods are beneficial, no matter how quickly they happen.

That’s why we’re so excited about some incredible companies that are combining both technology and healthcare in what we believe will become the third frontier of the IT revolution. Some of them are using AI to harness the power of genomic data to develop new drugs. Others are even redefining what the $11.9 trillion global healthcare industry is all about.

Meanwhile, Luke also focuses on technology and AI games

Let’s go straight to Luke:

In our view, the way forward for the markets is clear and positive. Following the rate cuts, the economy will grow stronger. Earnings will rise and so will stocks…

Especially AI actions.

Indeed, for all the talk of an “AI bubble,” the data actually suggests we’re at the beginning of an ongoing AI boom.

Luke highlights a handful of tech/AI companies that are reengineering and repurposing to meet the massive demand for AI for all things. From AI data centers, to IC manufacturers, to telecom infrastructure, to technology solution providers, the data points to robust demand.

Back to Luke:

The evidence here is clear to us. The AI ​​boom is bringing real and significant financial benefits across the global economy.

So don’t just buy stocks. Buy the best AI stocks – this is where the growth is happening right now.

For more on this, here’s a reminder to join Luke on Wednesday at 8pm ET for his discussion of The great technology reversal of 2024.

You’ll get Luke’s specific game plan for how he plays tech/AI as we head into the fall/holiday season. You can reserve your place right here.

Moving on to legendary investor Louis Navellier, one of his latest recommendations might raise an eyebrow…

If you are new to DigestLouis is a quantitative investor. It just means they base their market decisions on cold, unbiased numbers instead of hunches or guesswork.

The numbers they focus on all relate to fundamental strength. To illustrate, here are the eight factors that drive Louis’ buy/sell decisions:

• Sales growth
• Increase in operating margin
• Earnings growth
• Earnings time
• Winning surprises
• Analysts’ earnings reviews
• Cash flow
• Return on equity (ROE)

With this focus in mind, you may find it interesting that one of Louis’ most recent picks is on a non-earning asset…

Gold.

Now, I’ll quickly clarify that Louis’ focus on winning remains paramount. It’s just that year-round gold growth boosts earnings in gold mining stocks, which is where we find his latest recommendation.

Out of respect for Louis Growing Investor subscribers, I won’t share the name of the miner, but here are selected pick descriptions that illustrate how they relate to some of the eight fundamental factors I highlighted a moment ago:

• Adjusted second-quarter earnings rose 67.6% year-over-year
• The miner posted an earnings surprise of 18.9%.
• Analysts raised estimates for the third quarter by 16.3% over the past three months, and are now expected to rise 111.4% year-over-year.

In addition, the miner pays a dividend yield of almost 2%.

Louis isn’t the only one buying gold-related investments

Global central banks set a record for the most gold purchases ever in the first half of the year. Net purchases recorded 483 tonnes in the first half of 2024.

By the way, what was the previous record?

The first half of last year.

Purchases by global central banks in Q1 and Q2 of this year exceeded last year’s number by about 5%.

Source: Metals Focus, World Gold Council

No wonder gold has set a string of all-time highs since July.

Here is Louis’ final forecast for gold:

Given the chaos around the world – the ongoing war between Russia and Ukraine, as well as escalating tensions in the Middle East – gold prices have risen steadily this year. In fact, gold prices are up more than 20% year-to-date and passed over $2,500 in August.

Gold prices will continue to rise as global uncertainty and lack of confidence in central banks persist.

We agree. If your portfolio lacks gold exposure, you may want to reconsider adding some given today’s market environment.

good evening

Jeff Remsburg