Interest rate cuts are almost here. These are the sectors and stocks likely to get a boost

When interest rates decline, the likelihood of people buying homes and seeking home loans increases. In the U.S., many are waiting for rates to drop before making a decision, as the current interest rate hovers between 5.25% and 5.5%. Since March 2022, the Federal Reserve has raised rates 11 times, and the current level has held steady since July 2023.

Real estate stocks like American Tower, Prologis, Redfin, and others that have remained flat or in the red so far this year could experience price movement if interest rates decrease.

Just like with homes, when interest rates goes down, the number of people buying cars and seeking car loans increases. Many are currently debating whether to buy a car now or wait until 2025, and lower interest rates could make that decision easier.

Auto stocks like Tesla, Nissan Motors, and others that have struggled this year and remain down year-to-date could see a boost in sales if interest rates fall. It’s likely that lower interest rates would increase their stock prices as a result.

Consumer spending is a major driver of U.S. GDP growth. With strong retail sales data and favorable inflation, a potential decline in interest rates could be highly beneficial for the retail sector.

Lower borrowing costs may prompt consumers to purchase goods and services they’ve delayed due to expensive loans, particularly in the non-essential and retail categories, such as jewelry and electronics. It could be an opportune time to invest in undervalued retail stocks, such as Target, Lowe’s, etc.

Tech giants like Nvidia, Apple, and others with significant weight in indexes such as the S&P 500 and Nasdaq have been key drivers of market trends. When these stocks declined, they dragged the entire market down with them.

However, this dynamic could shift if interest rates decrease in September, providing investors with an opportunity to diversify beyond big tech stocks.

For example, biotech stocks like Bio-Techne and Solid Biosciences are worth watching as potential beneficiaries of this shift.

Gold typically rallies when yield-generating assets become less appealing. It’s important to note that despite gold’s upward trend, gold stocks have remained relatively flat year-to-date. This could change if interest rates decrease, making it worthwhile to keep an eye on companies like Barrick Gold and others in the sector.