Based on recent economic data indicating a decrease in inflation and slightly higher jobless claims than anticipated, it appears highly likely that the Federal Reserve will cut interest rates at the end of its September meeting, marking the first rate cut since March 2020. According to the CME FedWatch tool, financial markets expect a total of two percentage points of interest rate cuts by September 2025. This anticipated rate-cut cycle may lead to potential opportunities for certain stocks to thrive, such as in the real estate and banking sectors.
The real estate market has been sluggish due to increasing mortgage rates, which have doubled since the beginning of 2022. However, with the predicted rate cuts, a company like Redfin (NASDAQ: RDFN) could benefit from pent-up demand for homes and become profitable in a more favorable environment. Similarly, online bank SoFi (NASDAQ: SOFI) may see a boost in profits as lower deposit costs could improve its cost structure.
While there are promising prospects for these stocks as interest rates decrease, it’s important to consider potential changes in the Federal Reserve’s course of action. Consequently, investing in these stocks should be viewed as a long-term commitment. It’s important to conduct thorough research and consider all investment options, as there may be other stocks with significant growth potential.
This article was originally published by The Motley Fool.
