Economic growth and interest rate cuts are happening at the same time, posing a challenge to stock traders' investment strategies.

At the start of the Federal Reserve's rate-cutting cycle, Wall Street traders are facing a unique challenge in betting on stock market trends - history is no longer a reliable guide. When interest rates fall, the classic trading strategy is to buy stocks in defensive industries that are not affected by economic conditions, such as essential consumer goods and healthcare. Another popular strategy is to buy stocks in industries that pay high dividends, such as utilities. This is because the Fed usually cuts rates to combat economic weakness or stimulate an economy already in recession. During this time, stocks in growth industries like technology often take a hit. However, this time things are different. Instead, the economy is growing, stock indices are at historical highs, corporate profits are expected to continue to rise, and the Fed has started a rate-cutting cycle with a 50 basis point decrease. Frank Monkam, senior portfolio manager at Antimo, said, "With a relatively loose financial environment, the Fed chose to cut rates significantly. This is a clear signal that stock investors should take fairly aggressive positions." "Traditional defensive stocks, such as utilities or essential consumer goods, may not be very appealing." So where should stock investors turn their focus to? Walter Todd, president and chief investment officer of Greenwood Capital Associates LLC, suggests financial sector stocks. He is buying stocks in regional banks like Bank of America Corp (BAC.US), JPMorgan Chase (JPM.US), and PNC Financial Services Group, Inc. (PNC.US). Walter Todd said, "The Fed's rate cut should reduce banks' funding costs. The interest they pay on deposits will be reduced, which should help their net interest margins." David Lefkowitz, head of UBS Group AG's Global Wealth Management US stocks, also likes financial stocks and industrial sector stocks closely related to a strong economy. This positioning contradicts historical experience. Data compiled by Strategas Securities shows that in the past four rate-cutting cycles over the past 30 years, investors have favored stocks in sectors such as utilities, essential consumer goods, and healthcare that pay high dividends, which are popular among income-oriented investors as bond yields fall. Strategas Securities' data also shows that in the six months following the initial rate cut in those four cycles, the utility sector performed the best, up an average of 5.2%; the technology sector had the worst performance, down an average of 6.2%; real estate, non-essential consumer goods, and financial sectors also had significant drops. Historically, being bullish overall in a rate-cutting cycle with a strong economy and the Fed cutting rates has been a successful strategy. According to Bank of America Corp, since 1970, as long as the economy avoids a recession, the S&P 500 index has averaged a 21% increase in the year following the first rate cut in an easing cycle. More importantly, in eight of the last nine easing cycles, there has been a slowdown in earnings growth. But Savita Subramanian, head of US equity and quantitative strategy at Bank of America Corp, pointed out that currently, earnings are expanding, which is beneficial for cyclical stocks and large-cap stocks. She said, "The Fed has no script. Each easing cycle is different." Currently, investors seem to be re-entering large tech stocks and other growth stocks in the market. Data from Goldman Sachs Group, Inc. shows that hedge funds last week bought US tech, media, and telecom stocks at the fastest pace in four months. Meanwhile, as rates are falling, other investors are attracted to stocks that will benefit from increased spending by Americans. Phil Blancato, CEO of Ladenburg Thalmann Asset Management, said, "Consumers will be very excited. After the rate cut, consumers with mortgages will be stimulated to spend, whether in the real estate market, auto market, or year-end spending." Joe Gilbert, portfolio manager at Integrity Asset Management, believes that mall operators like Simon Property Group, Inc. (SPG.US) and the industrial sector of the real estate industry such as Prologis have opportunities. Joe Gilbert said, "Many real estate companies need to refinance debt. We believe that low interest rates will definitely help them." Utility stocks are also popular, but not necessarily because of their dividends. Mike Bailey, research director at Fulton Breakefield Broenniman LLC, said that these companies are involved in the artificial intelligence field by promoting the development of AI technology, which attracts investors. In fact, the utility sector has performed very well this year, rising by 26%, second only to the S&P 500 index, to the point where their valuations may be becoming too high. Mike Bailey said, "It's hard to know if we have already priced in all the good news for the utility sector. It feels like these companies may not see another rally beating the market." That being said, in this crazy bull market, everything seems possible - at least for now. Investors have shrugged off concerns about overvalued tech stocks, increased volatility, US political uncertainty, and a slowdown in hiring. Few analysts on Wall Street predict that the S&P 500 index will surpass 5700 by the end of 2024. But the index ended last week at...5702.55 points, after rising 24% last year, has risen another 20% so far this year. Phil Blancato said, "This is the best case scenario. By the end of this year, the S&P 500 index may have a chance to approach 6000 points."Je suis dsol, mais je ne parle pas franais.