With the Federal Reserve signaling a potential rate cut at its upcoming September 18 meeting, investors are reevaluating their strategies to adapt to the anticipated shift in the market landscape.
Oppenheimer analysts have highlighted that recent comments by Fed Chair Jerome Powell at the Kansas City Fed’s Jackson Hole Economic Symposium strongly suggest that a rate cut is on the horizon, likely by 25 basis points.
This expected shift in policy comes in response to a recent downward revision in cumulative payroll gains, which reduced job numbers by 818,000 over the past year. According to Oppenheimer, this adjustment, coupled with continued economic resilience, has provided the Federal Reserve with the confidence needed to pivot its policy direction, even as the economy remains robust.
The market’s reaction to Powell’s remarks was swift, with stock prices rising and bond yields falling, a response that Oppenheimer had anticipated. They believe this development will reinforce the broadening of the stock market rally that began last October. Initially concentrated in a few key sectors, the rally is now expected to spread to sectors that have lagged, contributing to more balanced growth across the market.
Oppenheimer continues to view the technology sector as a key driver of market leadership but also anticipates that other sectors, particularly those investing in tech-related services and infrastructure to improve business efficiencies, will benefit as well. This broader participation is considered essential for sustaining the market’s upward momentum.
“We expect the information technology sector to remain a leader in driving the market higher, while also allowing other sectors to share in the leadership and contribute to the overall market growth,” the analysts wrote.
Looking ahead, Oppenheimer maintains an overweight position on cyclical sectors relative to defensive ones and advocates for a diversified approach across growth and value investment styles, as well as different market capitalizations.
The analysts also suggest that small-cap and mid-cap stocks, which have experienced intermittent rallies, may attract renewed interest as the market adjusts to the Federal Reserve’s evolving stance.
