5 ETFs Primed to Soar if the Fed Cuts Rates in December

Core Insights - Expectations for a December rate cut from the U.S. Federal Reserve have intensified, with major banks and market participants increasingly viewing it as the most likely scenario [1][2] - The CME FedWatch tool indicates an 85% probability of a quarter-point reduction in December, influenced by weak payroll and inflation data [2][3] - A cooling labor market and limited hiring are pressuring policymakers to stimulate growth, making a rate cut imminent to support the labor market and guard against economic downturns [3] Sectors Poised to Benefit From Lower Rates - Technology Stocks: Lower rates increase the present value of future profits, significantly boosting current valuations for high-growth technology companies [5] - Small-Cap Stocks: These companies are more sensitive to domestic economic conditions and benefit from reduced debt servicing costs and increased access to affordable capital [6] - Financials: Banks with diversified operations may see improved loan activity due to lower rates [6] - Consumer Discretionary & Utilities: Lower interest rates enhance consumer credit access and spending power, benefiting profit margins in consumer discretionary companies, while utilities benefit from reduced financing costs [7] ETFs to Consider - Technology Select Sector SPDR ETF (XLK): AUM of $91.47 billion, exposure to 70 tech companies, top holdings include Nvidia (14.24%) and Apple (13.49%), has gained 22.6% year to date [9][10] - iShares Russell 2000 ETF (IWM): AUM of $71.69 billion, exposure to 1,958 small-cap U.S. companies, has gained 12.8% year to date [11] - Financial Select Sector SPDR ETF (XLF): AUM of $51.45 billion, exposure to 75 financial services companies, has risen 10.7% year to date [12][13] - Consumer Discretionary Select Sector SPDR ETF (XLY): AUM of $23 billion, exposure to 49 consumer discretionary companies, has gained 5.4% year to date [14][15] - Utilities Select Sector SPDR ETF (XLU): AUM of $22.07 billion, exposure to 31 utility companies, has surged 21.4% year to date [16][17]