Zhi Tong Cai Jing·2025-09-15 03:08Core Viewpoint - The report from CITIC Securities indicates that a new round of interest rate cuts by the Federal Reserve is imminent, which will benefit the U.S. real estate chain. A reduction in mortgage rates by 150-200 basis points historically leads to significant market movements, with beneficiary stocks typically seeing early valuation increases. The introduction of the "Big and Beautiful" plan has significantly widened the U.S. fiscal gap, creating potential for interest rate cuts. Given the current high-interest environment, the U.S. real estate market is at a critical low point, and rate cuts are expected to invigorate market activity, suggesting investment opportunities in home appliance and power tool export companies during this cycle [1]. Group 1 - The transmission of interest rates to real estate is precise, indicating a systematic reversal for the U.S. real estate chain. The strong cyclicality of the U.S. home appliance and tool industries is closely tied to changes in the real estate cycle, with revenue fluctuations of leading companies in these sectors closely mirroring trends in U.S. home sales. The U.S. real estate market is currently at a historical low, and demand for tools is expected to rise as the real estate cycle enters a recovery phase [2]. - The potential for stock price increases in the post-cycle sector is significant. Historical analysis of major interest rate cut cycles since the 21st century shows that a 150-200 basis point reduction in mortgage rates can lead to a doubling of stock prices for post-cycle companies. The predictability of interest rate policies has improved since the introduction of the dot plot by the FOMC in 2012, shortening the lag time for stock prices to respond to Fed rate cuts [3]. - The current high level of the federal funds rate is expected to decline. The "Big and Beautiful" plan will increase debt levels, further raising interest pressure. To mitigate risks from high interest payments and address rising unemployment, significant rate cuts are seen as a necessary policy choice for the White House. The weak job market is shifting the Fed's focus from controlling inflation to preventing recession, with expectations for rate cuts increasing significantly for September [4]. Group 2 - The U.S. real estate market is currently at its lowest transaction levels in nearly 20 years, with strong demand potential. However, the "rate lock" effect has suppressed activity for 2-3 years. The initiation of rate cuts, combined with home purchases by millennials, is expected to effectively activate the U.S. real estate market. Concerns about the effectiveness of moderate rate cuts in a high-interest environment are addressed by referencing recovery experiences from the 1980s, where moderate cuts in a high-rate environment also significantly boosted the real estate chain [5]. - With the gradual clarification of rate cut expectations, U.S. mortgage rates are likely to decrease, leading to a gradual recovery in the U.S. real estate market in the first half of 2026. This recovery is expected to further enhance the economic outlook for the home appliance and tool industries. Regarding tariffs, the pressure on Southeast Asian production capacities is not expected to exceed that of domestic capacities from 2024, making the overall impact manageable [6].