The Federal Reserve's policy reversal on interest rates has driven benchmark yields to the lowest levels in more than a year. For stock investors, the falling rates environment is now favoring one particular sector: consumer staples.
Now, consumer staples are back in favor after the Fed signaled it would pause interest rate hikes and as the economic outlook weakens. There are signs that investors have started rotating out of cyclical sectors like financials while buying into defensive ones, said Larry McDonald, founder of The Bear Traps Report. He pointed out that the performance of the Consumer Staples Select Sector SPDR Fund and Financial Select Sector SPDR Fund began to diverge in recent weeks.
Stephen Moore, a Heritage Foundation fellow who is expected to be nominated by President Donald Trump for an open seat at the Fed, said on Wednesday that the central bank should"immediately reverse course and cut rates by half a percentage point."
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