One group of stocks has been a surefire winner when the Fed cuts interest rates

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Investors bracing themselves for lower Federal Reserve rates should think about loading up on health care stocks, history shows.

Jerome Powell, Chair, Board of Governors of the Federal Reserve speaks during a conference at the Federal Reserve Bank of Chicago on June 4, 2019 in Chicago, Illinois.Many investors believe the Federal Reserve is set to start cutting interest rates, possibly as early as this week. And history shows one group of stocks stands out as an outperformer after the Fed begins cutting.

Health care stocks outperform the market by about 7% in the nine months following a rate cut, data compiled by Barclays shows. And what makes the group special relative to other groups is its consistency of performance following eases. The firm ran deep analysis on Fed rate cut cycles and found that overall market performance and performance of most sectors

. Barclays determined there were two types of rate-cutting environments: an economic "soft patch" and a recession. Health care was the only sector that thrived in both those rate-cutting scenarios.This is "an intuitive result given that soft patches still represent a weak economic environment," said Maneesh Deshpande, head of U.S. equity strategy at Barclays, in a note last week.

 

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