To The Moon

During yesterday's intraday trading, both the S&P 500 and the Dow Jones reached new highs.

Several institutions have once again raised their year-end target prices for the S&P 500.

There is still significant disagreement in the market about whether the Fed will cut rates by 25 bps or 50 bps this time.

Will rate cut continue to boost market higher or time to sell the fact?

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Click titles to read the full analysis:

1. @Chris Luk: Fed Rate Cut Dilemma: Will a 25 or 50 Basis Point Move Propel Markets or Trigger a Sell-Off?

Key Points:

Historically, the stock market tends to rise when the Fed cuts rates, provided the cuts are not tied to an imminent recession. Goldman Sachs’ macro strategist points out that in six out of ten rate-cutting cycles since the mid-1980s, the stock market rallied when a recession was averted. If the Fed delivers a 25 bps cut this Wednesday, the moderate nature of the reduction could reassure investors that the economy is still on relatively stable footing, maintaining market confidence. This would likely continue to support upward momentum in stocks, particularly if subsequent economic data points—such as job growth, inflation, and GDP figures—show signs of resilience.

Which Assets Would Benefit Most from a Rate Cut?

• Equities: If the Fed opts for a 25 bps cut, sectors that are sensitive to lower borrowing costs, such as technology, consumer discretionary, and real estate, could see an uptick. Lower rates reduce financing costs, making growth stocks more attractive. If the economy stabilizes, equities could continue their bullish trend.

• Bonds: A rate cut, especially a 50 bps cut, would likely lead to falling yields in the bond market, driving up prices for existing bonds. Investors seeking safety may flock to Treasury bonds, especially if the rate cut signals deeper economic concerns.

• Commodities: Precious metals like gold often benefit from lower interest rates as they become more attractive relative to yielding assets. If a 50 bps cut triggers recession fears, commodities like gold could see strong demand as a hedge against economic downturns.

• Currencies: A 50 bps cut would likely weaken the U.S. dollar, as investors seek higher yields elsewhere. This could provide a boost to emerging market currencies and assets, as well as foreign stocks that benefit from a weaker dollar.

2. @Spiders:

Key Points:

The expected rate cut could have significant effects on both my investments and my overall financial life. Regarding the stocks I currently hold, a rate cut is likely to have a positive impact. Lower interest rates often drive investors towards equities and the dividends from these stocks will likely become more attractive compared to lower-yielding bonds or savings accounts. This could enhance the value of my stock portfolio, which is a promising development.

However, one of my key investments is in Singapore savings bonds. With the anticipated federal reserve rate cut, future interest rates for SSBs may become less competitive. As a result, I may need to explore other investment options that offer better returns in a lower-rate environment.

In addition to SSBs, I have also invested in money market funds, which currently provide a decent yield. A rate cut, however, could reduce the interest these funds offer. This has led me to consider topping up my CPF special account, which provides a stable and relatively high interest rate. CPF's guaranteed returns make it a safe place for long-term savings, especially in a lower interest rate environment.

3. @ShengSoon:

Key Points:

I believe it'll be a 25 basis point cut. Being too aggressive might reignite the inflation and surely the FEDs won't want that to happen. During rate cuts, the sectors that will benefit will be Reits and those small CAP companies due to lower borrowing costs. Will park some fund in silver as well during this time of volatility. Not picking gold though due to lack of fresh funds.

4. @nomadic_m:

Key Points:

The S-REIT market has seen a significant surge, with the iEdge S-REIT index rising 3.6% after the release of lower CPI data in the US, indicating a potential rate cut. This has led to increased investor confidence, especially in REITs with high debt levels or US exposure.

Some top-performing S-REITs include:

- * $FAR EAST HOSPITALITY TR.(FEHTF)$*: One of the best-performing REITs with positive total returns
- * $First Reit(AW9U.SI)$*: Another top-performer with strong returns
- * $AIMS APAC Reit(O5RU.SI)$*: Also among the top three best-performing REITs
- *CapitaLand Ascends REIT*: Showing positive total returns
- * $Mapletree PanAsia Com Tr(N2IU.SI)$ * and * $Mapletree Log Tr(M44U.SI)$*: Expected to benefit from the projected rally

DBS analysts expect these REITs to significantly benefit from the potential rate cut, with investors favoring those with heavy exposure to Singapore real estate.

5. @Red Panda:

Key Points:

Anticipating the market volatility on the upcoming rate cuts. Many S-Reits are already bullish and the S-Reits or related ETF are close to or at their one year high. However, even if this coming rate cut is 50 bps, the rate is still rather high. Financing that are locked previously may still be at the high rate. A better outlook is a more definitive “rate cut” package for the upcoming months or year.

However, with the global uncertainties in middle east and eastern Europe, the inflation may shoot up and the potential rate cuts may stop short.

Questions for you:

Will rate cut continue to boost market higher or time to sell the fact?

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⏰Duration

• 25 September (24pm EDT)