The US Federal Reserve has cut the interest rate again, what should we invest in now?
Australia’s Reserve Bank of Australia (RBA) is in charge of deciding what the interest rate should be for the economy. The US Federal Reserve does the same job in the US. It has been raising interest rates in recent years to make up for the record-lows during the GFC.
US Federal Reserve Cuts Interest Rates
A couple of months ago the central bank decided to cut the interest rate by 0.25% for the first time in a decade.
Well, it hasn’t taken another decade for the next interest rate cut.
Overnight the Fed cut the US interest rate by another 0.25% to a target range of between 1.75% to 2%.
Analysts have largely been expecting another rate cut because of how much the ongoing trade war now seems to be affecting US & global growth prospects.
Fed boss Jerome Powell said: “The thing we can’t address really is what businesses would like, which is a settled roadmap for international trade …but we do have a very powerful tool which can counteract weakness to some extent,”
President Trump has wanted the Fed to help him out so that he can continue to battle China without causing a recession.
But was this enough for Trump? No. He tweeted: “Jay Powell and the Federal Reserve Fail Again. No “guts,” no sense, no vision! A terrible communicator!”
So What Should We Invest In?
At the large end of the ASX, investment bank Macquarie Group Ltd (ASX: MQG) may be the one best placed to actually grow profit from lower interest rates rather than just benefiting from a valuation improvement.
US dollar earners could also report higher earnings if the US dollar drops.
But the businesses that may see bigger valuation changes are high growth shares and shares that generate a percentage return on their assets like real estate investment trusts (REITs).
In the REIT space I’m most attracted to Vitalharvest Freehold Trust (ASX: VTH) and Altium Limited (ASX: ALU) is my preferred high growth share. But Webjet Limited (ASX: WEB) could be better value.
But Webjet and Altium may not be the best growth shares we could buy, it may be the ones revealed in the free report below.
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Jaz owns shares of Vitalharvest Freehold Trust and Altium at the time of writing, but this could change at any time.
