Investors cannot get their anticipation for interest rate cuts out of their minds. When the Federal Reserve held rates on Dec. 12-13, it decided on higher rates for longer. Markets interpret “longer” to mean only a few months.
Last Thursday, after The European Central Bank, Bank of England, Swiss National Bank, and Norges Bank met, they did not voice a rate cut. They re-asserted plans to hold rates.
Markets disagree.
The Fed leads the rate direction globally. The first rate cut will send the S&P 500 even higher after at least two quarters. Investors should stay in the market instead of trying to time the rate cut.
Cyclical stocks, real estate, REITs, banks, and technology stocks will take off. Preferred stocks are also highly attractive. They could add at least 5% to their price, after erasing the year’s losses last week.
Investors should avoid false rallies in speculative stocks. Underlying companies with poor balance sheets weighed down by debt will not survive. Companies with negative cash flow are abundant in the clean energy market. Beware of firms like FuelCell (FCEL) or Plug Power (PLUG).
Most EV stocks will fall in 2024. Tesla (TSLA) is the exception. In the truck EV market, Rivian (RIVN) has ample cash to expand its operations and scale production.
