No Interest Cut : Here's 6 Winners & Losers !

No Cut Strategy Is A Strategy.

On Wed, 18 Jun 2025, US central bank stuck with its strategy of leaving its key interest rate unchanged, even as officials' expectations for the economy worsened.

The decision marked the 4th in a row without action, keeping the bank's influential lending rate hovering around 4.3%, where it has stood since December 2024. (see below)

The “highly expected no cut” came despite forecasts from policymakers expecting, (a) slower growth, (b) higher unemployment and (c) faster inflation, than they did just a few months ago.

Impact on US Stock Market

It will be another 40 days before the FOMC next convene on Jul 29-30.

In the meantime, below is something that we could ‘possibly’ expect of the US market.

(1) Stability and Lower Volatility:

Holding rates steady reduces immediate uncertainty for investors, supporting market stability and potentially boosting confidence.

(2) Expectation of Future Cuts:

On Wed, 18 Jun 2025, the Fed signaled the possibility of two interest rate cuts in H2 2025 remains on the table but contingent on future economic developments.

(3) Sector Rotation:

Growth stocks, particularly those sensitive to interest rates, may receive a boost from the prospect of future rate cuts.

Conversely, financial stocks that rely on higher rates for profitability may lag.

With a ‘stable’ US economy (based on economic reports out so far) and a relatively ‘elevated’ interest rate to ‘discourage’ inflation, what are the best and worst sector stocks to own and to have ?

Note: Below are illustrative examples based on typical market behavior; actual top performers can vary based on company-specific news and sector trends. Self imposed due-diligence is a must!

Best Sectors.

Following types of stocks are most likely to benefit from a steady or potentially falling interest rates,

Growth Stocks.

• Companies like $Apple(AAPL)$, $Microsoft(MSFT)$ and Nvidia (NVDA) are likely to benefit from lower or stable interest rates, as their future earnings are more valuable when discounted at lower rates.

• AAPL’s stock has declined about -19% YTD, reflecting significant underperformance compared to broader market trends.

• It is in dire need of a recovery, pronto !

Consumer Discretionary:

• Amazon (AMZN) could benefit as lower borrowing costs support consumer spending and business expansion.

• AMZN is down modestly at -3.5% YTD. (see above)

• However, it is (i) leveraging strong operational results, (ii) right-sizing its white-collar work force, (iii) divesting in data centre in Australia and (iv) aggressively investing in AI and fulfillment to position for renewed growth.

• There is hope at the horizon.

Not The Best Sectors.

Using typical market behavior as a guide: (again), below are some sectors that do not respond well to a falling interest cut.

Banks and Financials:

• Stocks like $JPMorgan Chase(JPM)$, Bank of America, and Wells Fargo often see lower profitability when interest rates are steady or expected to fall, as their Net Interest Margins (NIM) compress.

Utilities:

While sometimes considered defensive, utilities like $NextEra(NEE)$ may not outperform as much in a stable or falling rate environment, though they are less impacted than financials.

Value Stocks (+ High Dividend Yields):

• Stocks that are less sensitive to growth expectations, such as $AT&T Inc(T)$ , may not benefit as much as growth stocks, though they are not necessarily hurt.

• AT&T has a remarkable performance so far in 2025.

• Its stock has surged over +20% YTD. (see above)

• It has been buoyant by strong earnings and subscriber growth.

• Further momentum expected in H2 2025 as company ramps up fiber & 5G expansion while launching share buybacks.

• Any interest cut/s will be a boost to its debt interest repayment.

A steady interest rate, coupled with a dovish outlook favour growth and tech stocks, while financials and high-dividend value stocks may lag behind. Do you agree ?

Remember to check out my other posts. (See below). Help to Repost ok, Thanks.

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