Traders Need a New Stock Market Playbook for These Rate Cuts
- Fed’s policy loosening is different with low odds of recession
- Wall Street pros eye financials, industrials tied to economy
The economy is growing, equity indexes are hitting all-time highs, corporate earnings are expected to keep expanding, and the Federal Reserve just went big with a half-percentage-point rate cut to kick off its easing cycle.
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Wall Street traders have a unique challenge in placing bets on the stock market now that the Federal Reserve has started cutting interest rates: History is no longer a guide.
The classic trading playbook for when rates are coming down is to buy stocks in sectors that are considered defensive in nature because their demand is impervious to economic conditions, like consumer staples and health care. Another popular play is shares of industries that pay big dividends, like utilities.