How Do Sectors Perform After the First Interest Rate Cut?
Today, the benchmark interest rate stands at 5.25- 5.50%, up from near-zero levels in 2022. Historically, equities have performed better after gradual rate cuts compared to swift reductions typically seen during economic crises. Sectors of the economy are also impacted in different ways, due to shifting consumer demand and interest rate sensitivity.
Ranked: Sector Performance During Rate Cut Cycles
Consumer non-cyclicals see the strongest returns after the first rate cut, particularly during recessions, thanks to steady demand for staple goods.On the other hand financials historically experience the weakest performance. This is due to the fact that interest rate cuts often signal that the economy is slowing, putting pressure on loan growth, credit losses, and default risk.
All the above data is based on the research done by Pinpoint Macro Analyst
Click for the research pdf