Jefferies has a list of stocks for investors to buy once the Federal Reserve starts cutting interest rates, widely expected to begin at the next central bank's policy meeting in September. Investors anticipate the Fed will lower its benchmark borrowing rate at least a quarter percentage point next month, the first reduction in more than four years. That's helped major U.
S. indexes to bounce back and tamp down market volatility since a sharp sell-off earlier in August. To support that view, investors are looking ahead to the release Wednesday of minutes from the Fed's July policy meeting, and Fed Chair Jerome Powell's Jackson Hole speech on Friday morning for clues of policymakers' view of the economy and how that may affect the outcome of the central bank's next meeting.
"The recent market turmoil is a clear message to the Fed that investors are primed for rate cuts," Desh Peramunetilleke, Jefferies' global head of quantitative strategy, said in a recent note to clients. "From a style perspective, value and yield would work the best in case of a soft landing along with autos, energy, telecom and banks." Jefferies screened for stocks that have outperformed in months when markets expected imminent rate cuts, signaled by falling 2-year Treasury yields, amid forecasts of an economic soft landing, as reflected in 10-year Treasury yields either falling a hair, or rising.
In this market environment, investors should focus on value stocks backed by strong earnings momentum, Jefferies.