Well, here we are.
The Federal Reserve is set to cut interest rates at next month’s meeting, ending the first normal interest rate period in two decades.
Never mind the fact that they haven’t hit their inflation targets…
…or that housing supply remains tighter than a liberal’s grip on their reusable shopping bag.
Jerome Powell and company have decided to boost Democrats with the gift of lower rates.
What changed their minds?
The latest job revisions said employers hired 800,000 fewer people in the past year than was reported.
It turns out all the pain we’ve all been feeling was real, and the “strong economy” story shoved down our throats was pure gaslighting.
The Fed doesn’t have control of inflation. Once they realize this, they will be forced to hold the benchmark at around 4.0%- 4.5%.
In the meantime, there are three sectors exploding to the upside, with plenty of room to run.
So, if you’re interested in getting ahead of the game, then keep on reading as we dive into the top plays for the back half of 2024.
Consumer Staples
While rate cuts tend to juice all stocks, there’s a lot of fear in the markets.
Investors are looking for places to hide that still provide growth.
Right now, they’re vacuuming up consumer staples.
Names like Coca-Cola (KO), Walmart (WMT), and Costco (COST) are making new all-time highs daily, as is the SPDR Consumer Staples ETF XLP.
Source: Stockcharts.com
Why would investors go for these companies with stretched valuations?
Think about it this way.
If the Fed hasn’t gotten inflation under control they’ll need to keep rates elevated.
That keeps high growth from taking place. And it even keeps unemployment elevated.
But people need to eat, drink, and clean, with many choosing ‘little luxuries’ like soft drinks as their escape.
In an environment with little value creation, consistent cash flow growth becomes extremely attractive.
Plus, if you were heading into a stagflationary environment, with persistently low economic growth, consumer staples become far more attractive than companies with cyclical demand.
While consumer staples are a great place to earn consistent dividends, there is one safety trade that’s been the go-to inflation hedge for years.
Gold
At over $2,500 an ounce, gold has never been more valuable than it is today.
Year-to-date, the yellow metal is up more than 18% and over 22% in the past year.
Source: Stockcharts.com
Since gold is denominated in dollars, and there’s a relatively fixed supply in the world, investors use gold to hedge inflation.
The main argument against gold has been the severe pullbacks we saw in 1979 and 2011.
However, both of those events occurred in heavily deflationary environments.
There’s no reason to believe the Fed would crash the U.S. economy on purpose, even if a proper deck clearing is warranted.
Another reason gold should remain buoyant is the excessive amount of government that’s accumulated.
Historically, high debt levels force governments make a currency less valuable. And as the U.S. dollar declines, gold naturally rises.
Both customer staples and gold are fairly common plays. But there’s one that’s been hiding in plain site that could be setting up for a multi-year rally.
Utilities
The story behind utilities is two-fold.
First, investors will use utilities as a proxy for Treasuries.
Utilities profits are a direct function of energy input costs, consumer energy demand, and the cost of debt.
The cost of debt is determined by interest rates, tying a utility’s profitability to Treasury rates.
Utilities pay consistent dividends similar to Treasury coupon payments. The amount they pay tends to grow slowly over time.
So, why are they having their best performance in years?
Source: Stockcharts.com
The safety play only explains part of the reason.
However, there’s a bigger dynamic at play, one tied directly to artificial intelligence.
AI programs require LOTS of power.
We’re talking so much that energy demand could double in 2024 from the prior year.
It’s gotten so out of control that Michigan is looking to restart a nuclear power plant it mothballed in 2022.
And this isn’t going away anytime soon.
Naturally, this creates an amazing investment opportunity in utilities themselves.
No wonder the XLU ETF is up over 20% year-to-date.
This is the backdoor play that no one is talking about.
However, it leads to an obvious conclusion – AI will be limited by power generation.
Companies are working feverishly to come up with a solution to this power consumption wall.
That’s why George Gilder’s latest idea is so ingenious.
You see, George believes the biggest opportunity isn’t in building more powerful AI chips, but making them more efficient and less power hungry.
And it all comes from one material…
…a material so revolutionary, it might just solve AI’s power problem while opening up a whole new world of tech possibilities.
You’ll want to check out George Gilder’s latest report to get the full scoop on what could be the most lucrative tech opportunity of the decade.
If even half of what he’s predicting pans out, you’ll be kicking yourself for not looking into this sooner.
Want to stay ahead of the curve?
Click HERE to Discover Gilder’s Next Big Tech Prediction
Don’t say we didn’t warn you when this hits the mainstream. By then, the real money will have already been made.
