Schroder: Which US stocks perform best during a rate-cutting cycle?

The U.S. economy is not expected to enter a recession, and the Federal Reserve may cut interest rates in September 2024, which would lead to momentum stocks, growth stocks, and high-quality stocks outperforming the broader market. In a rate-cutting environment, defensive sector industries may also perform well. Historical data shows that when the U.S. inflation rate approaches 2%, momentum investment strategies and technology stocks typically perform strongly. However, most cyclical sector industries tend to underperform in the first three months after the initial rate cut. An exception is the financial and non-essential consumer goods industries, which tend to perform well in the first few months after a rate cut. Cyclical sector industries like technology perform better in a rising market but experience larger declines in a falling market