The Federal Reserve’s interest rate cut will give a boost to these stocks, according to UBS. The central bank is set to release its latest policy decision Wednesday at 2 p.m. ET, with markets pricing in a half-percentage point cut as the most likely outcome. The CME FedWatch Tool last showed a 59% chance of a 50 basis point reduction. It’s a move that investors anticipate will relieve companies that have been contending with higher borrowing costs and inflation, boosting their bottom lines. UBS strategist Patrick Palfrey identified stocks that have historically outperformed when the Fed lowers interest rates, a move that he expects will especially benefit smaller, more volatile and less efficient companies. He expects this is true across the large-cap and small cap universes represented by the S & P 500 and Russell 2000. “Our work indicates that higher Price Volatility, lower ROE stocks tend to outperform when rates decline,” Palfrey wrote on Wednesday. “Smaller companies also benefit most, with small caps outperforming on down rate days.” Here are five S & P 500 stocks UBS expects can benefit most. KeyCorp is set to benefit from interest rate cuts. The regional bank based in Cleveland, Ohio has gained 15% in 2024, after struggling last year in the aftermath of the regional banking crisis. By comparison, the SPDR S & P Regional Banking ETF (KRE) is up more than 8% year to date. The stock is considered a buy, with 5 out of 22 analysts considering it a strong buy, according to the CNBC analyst consensus tool. Dollar Tree surfaced on the list. The discount chain has been under pressure recently, after earlier this month cutting its full-year outlook because of a weaker middle- and higher-income consumer. Shares of the dollar store have nearly halved this year. Moderna also came up on this list. Here are five Russell 2000 stocks that can benefit. Perpetua Resources came up as a name that matched the characteristics UBS is looking for. The exploration and development company that acquires mining properties mainly in Idaho has surged 180% this year. However, National Bank Financial earlier this month initiated coverage of Perpetua Resources with an outperform rating. The CNBC analyst consensus tool shows the stock is a consensus buy, with a $13.50 average price target implying more than 50% upside for the stock. EV charging station company Blink Charging and online consignment store ThredUp also surfaced on the list.
