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Tags: financial | stocks | fed | rate | cut

These 5 Financials Stocks May Do Well If Fed Cuts Rates

percent sign in shopping cart in rollercoaster car headed down
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By    |   Thursday, 27 February 2020 06:06 PM EST

While many on Wall Street expect the Federal Reserve to soon cut interest rates in attempt to ease financial fears over the coronavirus, central bank officials haven’t publicly tipped their hand on future plans.

Prior to the coronavirus outbreak, U.S. markets anticipated that the Fed would cut rates just once in 2020. At the conclusion of a meeting last month, Fed officials acknowledged that they were watching the situation but the meeting minutes released last week indicated rates would stay pat.

Barron’s recently suggested that investors expecting the Fed to lower rates may want to buy American Homes 4 Rent (AMH), CME Group (CME), Intercontinental Exchange (ICE), Chimera Investment Corp oration (CIM), and Blackstone Mortgage Trust (BXMT) as those stocks tend to outperform when fed futures fall, citing a note from Frederick Cannon, analyst at Keefe, Bruyette & Woods.

Lincoln National (LNC), SVB Financial Group (SIVB), Charles Schwab (SCHW), Bank of America, and Comerica (CMA) are most sensitive to a drop in rates, Cannon said.

“Banks and other balance-sheet-heavy financials have underperformed in this environment as it implies downward pressure on interest rates and net interest income,” Cannon wrote.

Meanwhile, Chicago Federal Reserve Bank President Charles Evans said on Thursday it was too soon to say if the U.S. growth forecast would be lowered due to the coronavirus epidemic, let alone if the U.S. central bank would need to cut rates, Reuters reported.

"I think it would be premature until we have more data and have an idea what the forecast is to think about monetary policy action," Evans told reporters at an event in Mexico City. "But we’re monitoring it very closely and if we see something that does require adjustment I’m confident that we will give that all the consideration that it needs."

Traders in financial markets are betting on an interest-rate cut. On Thursday they were pricing in about a 70% chance of the Fed starting to cut rates as soon as next month and trimming an extraordinary three-fourths of a percentage point by mid-year, according to CME Group's FedWatch.

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StreetTalk
While many on Wall Street expect the Federal Reserve to soon cut interest rates in attempt to ease financial fears over the coronavirus, central bank officials haven’t publicly tipped their hand on future plans.
financial, stocks, fed, rate, cut
343
2020-06-27
Thursday, 27 February 2020 06:06 PM
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