Much has been made of recently reported weakness in the job market, with some investors extrapolating that this weakness is a sign of looming recession. But remember that jobs numbers are inherently a backward-looking indicator—they only tell us where the ball has been, and not necessarily where it’s going. More specifically, I believe a resumption of the rate-cutting cycle could finally breathe life back into the housing market—and could kick off a bull run for one market segment in particular. Alphabet’s dominant search market share and expanding cloud footprint are key growth drivers.

But personally I think the greater risk is actually the reverse—that economic growth could reaccelerate. If growth were to tick up to a level of 4% to 4.5%, it would likely push long-term interest rates higher. The good news is that the inflation backdrop looks much better today than it did a year ago. And in my opinion, the odds are higher that rate cuts will translate into lower long-term yields, lower 30-year mortgage rates, and a revival of new and existing home sales. The ones most likely to beat the market and provide a positive return. The momentum factor’s headline performance has mirrored the strength of equity markets, sustaining an extended run alongside themes such as the surge of AI innovation and adoption.

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• More specifically, I believe a resumption of the rate-cutting cycle could finally breathe life back into the housing market—and could kick off a bull run for one market segment in particular.
• The material was prepared without regard to specific objectives, financial situation or needs of any investor.

At the center of everything we do is a strong commitment to independent research and sharing its profitable discoveries with investors. This dedication to giving investors a trading advantage led to the creation of our proven Zacks Rank stock-rating system. Since 1988 it has more than doubled the S&P 500 with an average gain of +23.93% per year. These returns cover a period from January 1, 1988 through October 6, 2025.

Flex benefits from growing data center exposure, strong global manufacturing scale, robust cash flow and strategic acquisitions. LendingTree’s reduced dependence on mortgage-related sources of revenues is expected to support its financials. Also, its inorganic growth moves have strengthened its online lending platform. Cboe’s growth strategy revolves around expanding product line across asset classes, broadening geographic reach, diversifying business mix with recurring revenues and leveraging technology.

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See daily market data for the most popular stock market indexes (indices) along with our coverage of markets, recent news, and analysis. My research focuses on analyzing market history to uncover patterns and probabilities that can help inform investors’ outlook and challenge their assumptions. Based on the current economic and market setup, I believe a rate cut from the Fed next week is likely to be a positive indicator for the stock market overall. Volatility lashed Wall Street, with strong evidence of a cooling labor market pushing high-valuation tech stocks and crypto to big losses while bonds rallied on bets the Federal Reserve will cut rates. This material may contain “forward-looking” information that is not purely historical in nature. Such information may include, among other things, projections, forecasts, estimates of yields or returns, and proposed or expected portfolio composition.

• The technology industries can be significantly affected by obsolescence of existing technology, short product cycles, falling prices and profits, competition from new market entrants, and general economic condition.
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Historically, in non-recessionary environments, cyclical sectors have outperformed by 2 percentage points on average in the 12 months after the Fed started cutting rates. By contrast, defensive sectors like utilities, health care, and consumer staples have underperformed by 3 percentage points on average in such environments. Usually, when that link doesn’t hold it’s because either inflation is high or economic growth is exceptionally strong. Last year, for example, the Consumer Price Index excluding food and energy (aka core CPI) was still close to an important 3.5% threshold level, around which rate cuts tend to have less of an impact on long-term interest rates. When the Fed has cut rates because it must—in response to a recession—returns have been poor. When the Fed has cut rates because it may—meaning inflation is low and growth is slowing, but not negative—returns have historically been strong.

Ms. Chisholm also held multiple roles within Fidelity, including research analyst on the mega cap research team, research analyst on the international team, and sector specialist. Denise Chisholm is director of quantitative market strategy in the Quantitative Research and Investments (QRI) division at Fidelity Investments. Fidelity Investments is a leading provider of investment management, retirement planning, portfolio guidance, brokerage, benefits outsourcing, and other financial products and services to institutions, financial intermediaries, and individuals. Looked at in isolation, the Fed’s actions have less predictive power than investors might think. Just because the Fed is cutting rates, or cutting rates after a pause, does not mean that stocks will necessarily go up. The Fed appears poised to cut rates next week—potentially restarting the rate-cutting cycle that began a year ago but has been on hold so far in 2025.

Why resuming rate cuts could be bullish for stocks

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This is not to say that recession is completely off the table as a possibility, but I believe recession risks are limited right now. And if the economy does keep growing, and the Fed does resume rate cuts next week, it could create very bullish conditions for US stocks. In fact, in past periods with similar conditions, stocks got a lift not only from rising expected earnings growth, but also from rising valuations like price-earnings ratios (PEs). What I find more convincing are certain leading indicators, meaning metrics that turn before the economy does. For example, CEO business confidence saw a big jump recently, with CEO expectations for conditions in their own industries rising by 30% over the previous quarter, according to data from The Conference Board and Haver Analytics.

My Portfolio – Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank. Tyson Foods’ strategy is anchored in operational excellence, customer and consumer obsession and sustainability. The company prioritizes innovation, marketing and customer alliances to fuel growth. The company leading position in probe card space and strengthening presence in DRAM and NAND markets remain positive.

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But economic growth of that level, even if it’s accompanied by higher rates, usually hasn’t been a problem for the stock market. Many investors think of lower interest rates as bullish for stocks. But history shows that rate cuts alone don’t reliably predict market direction. Rather, why the Fed is cutting is crucial in determining how the market subsequently performs.

Unless otherwise noted, the opinions provided are those of the speaker or author and not necessarily those of Fidelity Investments or its affiliates. Fidelity does not assume any duty to update any of the information. But combining historical patterns with today’s backdrop can help spotlight where the setup looks most promising.

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ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities. Previously, Ms. Chisholm performed dual roles as an equity research analyst and director of Independent Research at Ameriprise Financial. In this capacity, she focused on the integration of differentiated research platforms and methodologies. Before joining Fidelity in 1999, Ms. Chisholm served as a cost-of-living consultant for ARINC and as a Department of Defense statistical consultant at MCR Federal. Tesla needs the fab to build AI chip to power its self-driving tech, Musk said as he laid out potential manufacturing plans.

Zacks may license the Zacks Mutual Fund rating provided herein to third parties, including but not limited to the issuer. The setup isn’t flawless, but those low valuations improve the risk-reward profile. For example, even if home prices decline from here (which typically is bearish for homebuilders), those valuation levels could help buffer the downside—with builders experiencing only 3 percentage points of underperformance in such periods historically. On the flip side, if home prices can simply hold their ground, history suggests the upside could be significant—with builders experiencing 30 percentage points of outperformance in similar periods historically. That kind of scenario might put a wrench in my Cfd trader thesis on homebuilder outperformance.

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Unlike other style factors, momentum is inherently adaptive, evolving to capture prevailing performance trends. But that adaptability can leave investors uneasy, as long stretches of outperformance often raise concerns about crowding and stretched valuations. The technology industries can be significantly affected by obsolescence of existing technology, short product cycles, falling prices and profits, competition from new market entrants, and general economic condition. Stock markets are volatile and can fluctuate significantly in response to company, industry, political, regulatory, market, or economic developments. Investing in stock involves risks, including the loss of principal. Prior to assuming her current position, Ms. Chisholm was a sector strategist focused on sector strategy research, its application in diversified portfolio strategies, and ways to combine sector-based investment vehicles.

Putting all these themes together, what I see is a potentially bullish outlook for stocks, against the backdrop of a strong economy and falling rates. While the Fed cut its benchmark interest rate by a full percentage point from September to December of 2024, long-term interest rates like those on the 10-year Treasury and 30-year mortgages instead rose over the same period. Zacks Portfolio Tracker on Zacks.com provides 24/7 monitoring of your stocks and will give you the information you need to help you determine when to buy, hold or sell your stocks.