The Federal Reserve is expected to initiate an interest rate cut in September 2024, reflecting easing inflationary pressures.
After aggressively raising rates over the past two years to combat high inflation, analysts’ projections indicate that the institution will likely reduce rates by 0.25%.
Notably, a potential rate cut could significantly boost the stock market, benefiting companies poised to take advantage of a more accommodative monetary policy. Therefore, here are two stocks investors might consider buying before the Fed’s anticipated rate cut:
Picks for you
NextEra Energy (NYSE: NEE)
NextEra Energy (NYSE: NEE) is a standout choice for investors seeking stability in the utility sector. As one of the largest electric utility companies in the U.S., NextEra boasts a robust portfolio with a strong emphasis on renewable energy sources like wind and solar.
Utility stocks like NextEra Energy often perform well in a lower interest rate environment due to their stable cash flows and attractive dividend yields. Utility companies typically carry substantial debt for infrastructure projects, and a rate cut would reduce borrowing costs, directly benefiting their bottom line.
The stock has also demonstrated impressive performance in 2024, gaining by double digits. This rally is attributed to Florida’s strong economy and NextEra’s expansion into low-cost renewables and battery storage. The company has added over 3,000 MW of new projects, including 860 MW from Google, supporting long-term growth.
Additionally, NextEra’s strong balance sheet and consistent dividend payments make it an appealing option for income-focused investors.
The stock closed at $80 on August 30, reflecting a year-to-date gain of over 30%.
JPMorgan Chase (NYSE: JPM)
JPMorgan Chase (NYSE: JPM) is well-positioned to benefit from a lower interest rate environment as one of the largest and most diversified financial institutions. While banks typically profit from higher rates, a rate cut could provide a tailwind for JPMorgan for several reasons.
A rate cut will likely stimulate borrowing and lending activity, with consumers and businesses taking advantage of lower borrowing costs. JPMorgan’s diverse portfolio—encompassing consumer and commercial banking, asset management, and investment banking—positions the company to capitalize on this increased financial activity.
Notably, in Q2 2024, JPMorgan reported revenue of $50.99 billion, surpassing the $49.87 billion estimate, primarily driven by strong investment banking. Lower interest rates could also boost the housing market, with more affordable mortgages increasing demand for home loans. As a leading mortgage lender, JPMorgan stands to benefit from this trend.
JPMorgan’s stock is currently trading at an all-time high, buoyed by strong market momentum and optimism about a soft landing for the U.S. economy.
As of press time, the equity was trading at $224, reflecting 30% YTD gains.
While the timing and magnitude of the Fed’s rate cut remain uncertain, these two stocks are supported by fundamental factors likely to drive their performance in the wake of the anticipated monetary policy changes.
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Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.
