The Fed is going all in! What should you buy NOW?

The Federal Reserve didn’t just cut rates at its September meeting. It cut the BIG, opting for a 50 basis point move. Policymakers also signaled they’ll continue to cut rates through the end of 2024 and most of 2025. What investments could generate the most profit and profitability in this world of falling interest rates? Find out from three of MoneyShow’s top experts.

Mike Larson MoneyShow.com

Charts can tell you a lot of things as a trader. The MoneyShow weekly chart below tells you A LOT…the only question is, are you listening?

Take a look at this chart showing the performance of five ETFs over three months: one each tracking real estate investment trusts (REITs), utilities, gold, small-cap stocks and the decline of the U.S. dollar…

As you can see, over the last 90 days, the Real Estate Select Sector SPDR Fund (XLRE)
Select Real Estate SPDR Fund
) rose 17.3%. The Utilities Select Sector SPDR ETF (XLU
SPDR Fund for the Municipal Services Sector
) rose 12.3%. SPDR Gold Shares ETF (GLD
SPDR Gold Shares
) rose 10.6%. iShares Russell 2000 ETF (IWM
iShares Russell 2000 ETF
) rose by 9.1%. Invesco DB US Dollar Index Bearish Fund (UDN
Invesco DB US Dollar Index Bear Fund
) gained 5.1%.

What’s the message here? That the Federal Reserve intends to cut interest rates early, often, and by a large amount!

When this happens, it historically benefits bonds, gold, and interest-rate-sensitive sectors of the stock market. It also tends to disproportionately favor small caps, because these companies tend to have higher debt loads and therefore benefit more from falling interest rates. On the other hand, lower interest rates hurt the value of the dollar.

In recent months I have recommended ways to profit in Chart of the Week articles, including one on bonds in June and one on gold in August. I hope they have been effective.

What about stocks and the ongoing market rotation towards NEW winners? What’s not to like? This is healthy and will likely continue. Play this trend as much as you can! After all, the Fed is on your side.

Carl Delfeld Cabot Explorer

The Federal Reserve voted to cut interest rates by half a percentage point, its first cut since 2020 and a bigger cut than many expected. The overwhelming majority of the Fed’s board votes suggest more rate cuts are likely this year. Meanwhile, I still like the power play in the nuclear sector at Centrus Energy Corp. (LEU).

The Fed’s move was clearly somewhat built into markets. But this action will help support the market and boost interest-rate-sensitive stocks like real estate and utilities.

(Editor’s Note: Carl Delfeld is speaking at the Alternative Investing Virtual Expo, November 12-14, 2024. Click HERE to register)

Now we need to see how labor markets and especially corporate earnings play out. More important than the Fed cutting interest rates for stock markets and the economy is whether the next Congress will continue to increase deficits and the national debt. If so, it is inevitable that interest rates will have to rise over time.

Meanwhile, we’re looking at new ideas for nuclear power, as nuclear plants generate electricity 24/7/365—more than twice as much as solar and wind sources. The generating assets require fewer maintenance outages than coal or gas, making electricity even more reliable.

Nuclear power is the only carbon-free baseload energy source available today that offers efficient, 24/7 operation. One example is Georgia Power’s Vogtle Generating Station in Waynesboro, Georgia, which delivers carbon-free nuclear power to more than a million homes.

As for LEU, its stock has been steady this week as demand for processed uranium increases. Russia reportedly supplies about 14% of the world’s uranium concentrates, 27% of conversion and 39% of enrichment, while Kazakhstan produces 43% of the world’s uranium.

Four hundred and forty nuclear reactors in 32 countries supply about 10 percent of the world’s electricity. About 65 new nuclear reactors are under construction worldwide, with another 110 planned. Centrus is at the center of this growth as a diversified supplier of nuclear fuel and services to nuclear power plants in the U.S. and around the world.

Recommended action: Buy LEU.

Steve Reitmeister Zen Investor

Real estate is very sensitive to interest rates, as you might imagine. That’s why it makes sense to add a homebuilder like M/I Homes Inc. (MHO) as interest rates are expected to head lower.

There were many colleagues in the industry I could have chosen over them. However, it was the impressive growth in their earnings over the past two years, as rates have risen, that helped me appreciate how well the organization is run.

This has translated into industry-leading gains for MHO’s stock (orange line) – almost twice as much as its peers, as can be clearly seen in the performance chart below.

The problem with price action is that it’s a statement from the past. Looking ahead, MHO is expected to earn $20.76 EPS in 2025. That’s more than 15% higher than its last quarterly earnings report. It’s worth noting that the company only beat by 11%… so that tells us analysts see more good times ahead.

The top analyst covering the company right now is Raymond James’ Buck Horne (Top 9%), who thinks $210 is the right target for the stock. That sounds good at current levels… but it only equates to 10 times next year’s earnings. That, to me, makes the upside potential even more impressive, making it very attractive to build a position in the stock below $170.

One of my favorite things about MHO is that it is undervalued by Wall Street. However, with such an impressive earnings pace and fundamentals in the top 5% of all stocks measured by POWR Ratings… I suspect more analysts will start MHO with “Buy” ratings.

This fresh analyst coverage is sure to be a catalyst for the stock to break above $200… and stay there. Plain and simple, with interest rates falling, few stocks are more attractive than MHO.

Recommended action: Buy MHO.

Mike Larson MoneyShow.com

Both the Federal Reserve and the Bank of Canada have begun interest-rate cuts. The U.S. and Canadian economies face questions about the risk of recession. And U.S. and Canadian investors are wondering what’s next for stocks, real estate, currencies and commodities.

That’s why I caught up with Benjamin Tal, Deputy Chief Economist at CIBC Capital Markets, just before our wildly successful MoneyShow Toronto 2024 conference. In this week’s MoneyShow MoneyMasters Podcast segment, which you can watch here , he covered all the basics for your benefit.

We start with a discussion of the Canadian economy and how Benjamin believes it is already in a “per capita recession” – and immigration is the main factor keeping GDP from deteriorating. He then discusses labor market conditions on both sides of the US/Canada border… the past, present and future direction of interest rates… and whether or not our two economies are headed for a soft landing.

Benjamin then discusses the “tale of two markets” in Canadian real estate, how the changing economic environment and interest rates will impact currencies and gold, and what the upcoming U.S. presidential election could mean for taxes, trade, and growth. Finally, he discusses one factor that could cause more cash to OUT of one asset class and INTO another in Canada.

If you missed our event in Toronto, you can meet many other market experts like Benjamin at MoneyShow Orlando 2024. It is scheduled for October 17-19 at the Omni Orlando Resort at ChampionsGate. Click here to register.