4 Ways You Can Profit From the Fed’s Rate Cut, According to Finance Guru Graham Stephan
The Federal Reserve’s recent decision to cut interest rates has sent ripples through the economy, affecting stocks, housing and borrowing costs. In a Youtube video, finance expert Graham Stephan breaks down how ordinary investors can leverage this move to their advantage. According to Reuters, lower rates are now driving U.S. banks to reduce their prime lending rates, benefiting both businesses and consumers with more accessible credit.
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While the Fed’s rate cut marks the end of a tightening cycle, concerns over jobs, inflation and the national debt complicate the picture. Below, we explore five practical ways Stephan suggested to profit from the new economic backdrop, from investing smartly to managing risk with diversification and alternative assets.
Also here are Stephan’s five proven habits for building wealth.
Lower Borrowing Costs for Businesses and Consumers
When the Fed cuts rates, borrowing money becomes cheaper for both businesses and individuals. This can mean more capital for companies to invest in growth, new projects or hiring, which could boost stock prices. For consumers, lower interest rates might reduce loan and credit costs, leaving them with more money to spend.
Stephan explained that cheaper capital encourages reinvestment and spending, which propels economic activity and potentially raises asset prices. It’s important to note, however, that mortgage rates may not fall immediately after a Fed rate cut. They depend on long-term Treasury yields, not just Fed policy, according to CNBC.
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Still, overall borrowing costs generally trend down, creating opportunities for investors who position themselves ahead of increased economic activity. For investors, sectors like technology and real estate usually respond positively to declining borrowing costs, making them attractive for portfolio diversification. Patience remains important, as the full economic impact typically unfolds over months, not days or weeks, per expert reactions to the recent cut.
Focus on Long-Term Treasury Influences
Stephan highlighted the critical role of the 10-year Treasury yield in shaping long-term borrowing costs, such as mortgages and corporate loans. Unlike short-term rates controlled directly by the Fed, the 10-year yield fluctuates with investor sentiment about inflation and national debt stability. This yield can keep mortgage rates high even when Fed rates fall.
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