If history is any guide, certain stocks should emerge as winners as the Fed seeks to lower short-term interest rates. The Federal Reserve kept interest rates unchanged on Wednesday as expected and noted the progress it had made on inflation. Traders are betting the central bank is preparing markets for a rate cut at its next meeting in September. Short-term yields have been falling this week in anticipation of action from the Fed. The 2-year Treasury yield fell about 6 basis points this week (1 basis point equals 0.01%). The two-year Treasury yield fell to 4.38% from once above 5% this year. CNBC Pro screened the stocks in the S&P 500 that have risen the most when short-term interest rates fall. If short-term interest rates continue to fall in the near future, these stocks could be winners. We looked at the largest weekly decline in the 2-year Treasury yield over the past 12 months. The following stocks had the biggest gains during those weeks. We also removed the list and selected only those stocks that continued to rise – rising every week during the weeks when yields were falling. Most stocks belong to businesses that will benefit from lower interest rates. Camden Property Trust is an apartment real estate investment trust that is one of the most consistent winners when interest rates fall. Many other stocks on the list also have ties to the real estate industry, including: Builders FirstSource, Home Depot, PutleGroup, Lowe’s, and Carrier. There are also typically some more volatile stocks that benefit from lower interest rates, increasing investors’ risk taking. Palo Alto Networks, Monolithic Power Systems and Qualcomm are among those in this camp.
