Federal Reserve interest rate cuts are a boon to all stocks. But they are especially beneficial to certain names tied closely to housing and finance, as well as economic growth. We’re talking about the likes of Home Depot , Bristol Myers Squibb , and Capital One , which have all gained ground in August — roughly 11%, 8.5%, and 5%, respectively — as expectations of a Fed rate cut at the central bank’s September meeting ramped up. The market is putting over 85% odds on a cut, according to the CME FedWatch tool. The Fed has not moved rates since the three cuts at the end of last year. Fed Chairman Jerome Powell , under intense pressure from President Donald Trump to lower borrowing costs, said last Friday that conditions “may warrant adjusting our policy stance .” In his Jackson Hole speech, Powell said he still sees inflation risk from Trump’s tariffs, but he’s more concerned at the moment about the slowing labor market. Central bankers have been grappling for months about which part of their dual mandate — fostering stable prices and maximum employment — should be driving their decisions. In response to Powell’s dovish remarks, the stock market roared higher last week. The S & P 500 this week has been little changed. If the Fed’s September meeting does indeed usher in renewed rate cuts, the big question is whether the bond market will cooperate. When the Fed cuts rates, bond yields tend to go down, too. That’s important since, for example, mortgage rates take cues from the 10-year Treasury yield , which has declined somewhat since last Friday. Where it goes from here is crucial because the 10-year yield did fall to a low of about 3.5% in anticipation of last year’s rate cuts before reversing higher as inflation picked up. It has remained elevated — around 4.23% on Friday — keeping mortgages and other consumer debt costs elevated. While it is unclear how the Fed’s rate-cutting cycle will unfold, or if bond yields will follow their historical patterns, there are seven portfolio stocks, including Home Depot, Bristol Myers, and Capital One, that we believe are well-positioned to gain from a low-interest-rate environment. Housing Home Depot is our biggest winner from lower borrowing costs. If mortgage rates come down meaningfully below 6%, and there’s a rebound in the housing market, that means more demand for the home improvement giant. Usually, the first thing a new homeowner does is undertake remodeling projects, which is Home Depot’s sweet spot. In fact, lower rates are a key reason why the Club started a position in Home Depot in the first place. Candidly, this catalyst has not panned out as quickly as we hoped, in part, due to the bond market’s lack of cooperation. That being said, we’re not giving up on this stock yet. Home Depot has been leaning into its pro business, which tends to be less volatile than the do-it-yourself side of the house. DuPont will see upside to a key business if the housing market improves. The company’s…
Read More: 7 portfolio stocks that stand to benefit most from Fed rate cuts