Prices are expected to fall. Renew your fixed income holdings.
The Federal Reserve’s high interest rate regime—with the current target range of 5.25% to 5.5%—has rewarded investors who have parked their money in money market funds and high-yield certificates of deposit, but the party is about to end.
High yields on cash are expected to fall once the Fed cuts interest rates, meaning investors should redeploy some of that money into longer-dated bonds.
Medium-term bonds allow investors to benefit from current high yields while mitigating exposure to dramatic price fluctuations associated with interest rates.
CNBC Pro subscribers can read the full story here.
-Darla Mercado
CNBC Pro: What the stock market historically does after the Fed's first rate cut
With the US Federal Reserve expected to cut interest rates for the first time in four years on Wednesday, it's time to take a look at how the stock market has performed at the start of previous easing cycles.
Historical data shows that what the stock market did after the first Fed rate cut historically depended largely on the economy. Overall, across all cycles, the S&P 500’s performance following the first rate cut was largely positive, but with some big misses when the economy took a dive.
CNBC Pro subscribers can read the full story here.
— Sarah Maine
These Are the Most Attractive Dividend Stocks to Buy Ahead of the Fed's Rate Cutting Cycle
There are a handful of high-yield stocks — including several energy names like Exxon Mobil and ConocoPhillips — with strong upside potential that investors can capitalize on as the Federal Reserve is expected to start cutting interest rates.
Lower interest rates would make the returns on dividend stocks more attractive, which would boost the value of the group. These stocks could also be used as a reliable hedge against any economic slowdown if central banks end up defaulting on interest rate cuts.
Using the CNBC Pro Stock Screener, we looked for stocks with a dividend yield above 3% and a low debt-to-equity ratio below 60%. So these stocks are making large payouts and have low debt loads, which means they should be able to continue paying those dividends. They’re also poised to see a 10% or more rise, according to analysts.
Click here to view the results on CNBC Pro's Stock Screener and to create your own. Read the full story on CNBC Pro.
— Pia Singh
Here are some stocks that do well when the Fed cuts interest rates without triggering a recession.
Many investors are betting that the Federal Reserve will be able to avoid a recession by easing monetary policy from its current levels.
Against this backdrop, CNBC Pro examined the stocks that performed well when the Fed cut interest rates without triggering a recession. Among the names that made the cut: Nike, Amgen and United Health.
CNBC Pro subscribers can read the full list here.
— Fred Imbert
More than just a rate cut: What can we expect from the Fed's decision?
Traders are eagerly awaiting the Federal Reserve's decision on interest rates – and the conclusion of the central bank's two-day meeting is expected to be interesting.
The Federal Reserve is expected to cut interest rates for the first time since 2020, but markets are divided on whether policymakers will cut rates by 25 basis points or 50 basis points. One basis point is equal to one hundredth of a percent. The Fed’s target range for interest rates is currently 5.25% to 5.5%.
Wall Street will also be looking at the Fed’s “dot plot,” where policymakers share their expectations for interest rates over the next few years. At the conclusion of the meeting, central bank officials will also release their summary of economic projections, which includes forecasts for GDP and inflation.
Read more from CNBC's Jeff Cox on what investors can expect from the Fed.
-Darla Mercado
Here's Where Consumer Prices Stand as Markets Expect a Fed Cut
The Federal Reserve is expected to cut interest rates for the first time on Wednesday after more than two years of tightening monetary policy. The central bank’s target range for interest rates is currently 5.25% to 5.50%.
Higher interest rates have been tough on borrowers, with the 30-year fixed-rate mortgage rate rising to 6.12% as of the week of Sept. 13, according to Mortgage News Daily. That’s up from 4.29% the week of March 11, 2022, before the Fed began raising rates for the first time.
Home equity loans have also become more expensive, with rates rising to 8.49% as of last week, compared with 5.96% in March 2022, according to Bankrate. Credit card interest rates have jumped more than 400 basis points since the Fed began hiking rates, rising to 20.78% as of last week, according to Bankrate. One basis point is equal to one-hundredth of one percent.
Still, the Fed’s hawkish policy has offered a glimmer of hope for savers. The relative annual yield on a five-year certificate of deposit jumped to 2.87%, up from 0.5% in March 2022, according to Hafer. Yields on money market funds also jumped, settling at 0.46% last week, compared with the 0.08% they paid before the Fed began tightening in March 2022, according to Hafer.
— Darla Mercado, Nick Wells
Uncertainty is growing about the potential size of the Fed's rate cut ahead of a decision.
In the hours leading up to the Federal Reserve's interest rate decision, investors remained divided on how far policymakers would go in cutting rates.
Fed funds futures are signaling a 55% chance that central bankers will cut rates by 50 basis points, according to the CME FedWatch tool. They are also signaling a 45% chance that the Fed will cut rates by 25 basis points. The Fed’s target range for interest rates is currently 5.25% to 5.50%. A basis point is one-hundredth of a percentage.
Aditya Bhave, chief U.S. economist at Bank of America, said investors should watch what they wish for. The firm expects a 25 basis point cut on Wednesday, warning that a 50 basis point cut could ultimately be a worrying sign.
“Risk assets may initially rally on this dovish surprise,” Bhavy wrote on Wednesday. “But we caution investors that a 50bp rate cut means the Fed is less confident in the possibility of a soft landing.”
— Darla Mercado
