Expected Rate Cut Prompts Funds to Eye Consumer Staples, Technology

With the Federal Reserve expected to cut rates further on Tuesday, mutual fund managers are taking a closer look at particular sectors—

namely consumer staples, technology, energy, telecom, industrials and healthcare, MarketWatch reports.

While there have been some reports that the rate cut will be 25 basis points, some believe it could be as much as 50 basis points or more. If that is the case, then fund managers will not only look at consumer staples and technology, will probably also take a more aggressive stance.

Dan Frascarelli, lead manager of the Lord Abbett Large-Cap Core Fund, said, “If it’s only a 25 basis points cut, we think it’ll be a very short-lived rally.” If the cut is 50 basis points or more, he said, he favors financials.

Ron Muhlenkamp, manager of the Muhlenkamp Fund, agreed. “Financials should be the first to benefit from any loosening in the money [supply],” Muhlenkamp said. “But this time around, there’s a lot of uncertainty about how to price credit instruments in the market. So you want to stay with the biggest and broadest players.”