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Market Update: 07-29-19

MORE ON FED RATE CUT IMPLICATIONS

John Lynch Chief Investment Strategist, LPL Financial | Jeffrey Buchbinder, CFA Equity Strategist, LPL Financial

The Federal Reserve (Fed) is likely to start an easing cycle this week, which has several investment implications. We have written a fair amount about the Fed’s U-turn in policy stance this year, including last week’s Weekly Market Commentary. That reversal from raising rates to presumably lowering them will become a reality if the Fed cuts rates at this week’s policy meeting, which concludes on Wednesday, July 31. Here we look at some potential asset allocation implications from this monetary policy transition.

GROWTH VS. VALUE

First, let’s look at what initial Fed rate cuts might mean for growth stocks. This 10-year-old bull market has been powered by growth stocks. Much of that bull market has been accompanied by abnormally low interest rates and Fed bond purchases, also known as quantitative easing. Does that mean Fed rate cuts will fuel more...

Download the complete PDF with graphs here.

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