With the U.S. Federal Reserve facing a pivotal decision next week, a market expert suggests that an impending interest rate cut creates a strategic opportunity for investors to restructure their portfolios.
Three Asset Classes To Focus On Ahead Of Rate Cuts
John Murillo, Chief Business Officer of the global fintech solutions provider B2BROKER, believes investors should consider shifting focus to three key areas: bonds, large-cap growth stocks, and real assets to navigate the changing economic landscape.
The recommendation comes as expectations mount for a 25-basis-point rate cut at the Federal Open Market Committee (FOMC) meeting scheduled for September 16–17.
Bonds
Assuming the rate cut occurs, Murillo outlines a clear strategy for investors. He explained that dropping interest rates and declining cash yields "would certainly make bonds more attractive for income and capital appreciation."
He advises investors to consider "moving any extra cash into solid fixed-income stories to take advantage of yields before they drop even more," Murillo told Benzinga.
This comes as the bond yields for U.S. Treasuries have been dropping. The 10-year Treasury was yielding 4.05%, whereas the two-year bond yielded 3.56%, as of the publication of this article. The long-term 30-year yield has also slipped to 4.67%.
Large-Cap Growth Stocks
In addition to fixed income, Murillo points to selectively investing in large-cap growth stocks, whose sensitivity to interest rates could lead to amplified initial gains.
Here’s a list of a few large-cap growth stocks.
| Stocks | YTD Performance | One-Year Performance |
| Nvidia Corporation (NASDAQ:NVDA) | 28.10% | 48.71% |
| Apple Inc. (NASDAQ:AAPL) | -5.67% | 3.26% |
| Microsoft Corp. (NASDAQ:MSFT) | 19.69% | 17.33% |
| Amazon.com Inc. (NASDAQ:AMZN) | 4.42% | 22.97% |
| Alphabet Inc. (NASDAQ:GOOG) | 26.31% | 54.80% |
| Meta Platforms Inc. (NASDAQ:META) | 25.31% | 42.87% |
| Tesla Inc. (NASDAQ:TSLA) | -2.76% | 60.48% |
| Broadcom Inc. (NASDAQ:AVGO) | 55.03% | 118.54% |
| Taiwan Semiconductor Manufacturing Co. Ltd. (NYSE:TSM) | 28.44% | 51.03% |
Real Assets
Finally, he recommends adding real assets to portfolios as a safeguard against a weakening U.S. dollar and persistent inflation concerns.
The U.S. Dollar Index spot was 0.18% higher at the 97.7090 level. It was down 10.11% on a year-to-date basis.
Meanwhile, Gold Spot US Dollar rose 0.39% to hover around $3,648.18 per ounce, as of the publication of this article. Its last record high stood at $3,674.75 per ounce. The price of the precious yellow metal has surged 24.46% over the last six months and 42.62% over the last year.
Political Pressure Mounts On Federal Reserve
The central bank finds itself in a "delicate position," caught between emerging challenges in the U.S. labor market, ongoing structural inflation, and significant political pressure to lower borrowing costs. Murillo argues that the Fed has little room to maneuver.
"Any further abstention from the rate action would face a strong negative reaction, not only stemming from a perception of the Fed's ‘homebodyness,' but also taking into account much more impactful political considerations," Murillo said, referencing President Donald Trump‘s vocal stance on the issue.
Price Action
The SPDR S&P 500 ETF Trust (NYSE:SPY) and Invesco QQQ Trust ETF (NASDAQ:QQQ), which track the S&P 500 index and Nasdaq 100 index, respectively, were mixed in premarket on Friday. The SPY was down 0.035% at $657.40, while the QQQ advanced 0.13% to $584.82, according to Benzinga Pro data.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
Image Via Imagn
