4 ETFs That Could Soar as the Fed Cuts Rates This Year
The Federal Reserve has been slow to make any rate cuts this year but forecasted two rate cuts by the end of the year. The projected rate cuts will bring interest rates down by 0.5%. Each rate cut reduces the cost of borrowing money, which makes it easier for corporations to access capital and expand […] The post 4 ETFs That Could Soar as the Fed Cuts Rates This Year appeared first on 24/7 Wall St..
The Federal Reserve has been slow to make any rate cuts this year but forecasted two rate cuts by the end of the year. The projected rate cuts will bring interest rates down by 0.5%. Each rate cut reduces the cost of borrowing money, which makes it easier for corporations to access capital and expand operations.
Lower interest rates also make it more affordable for consumers to incur debt via credit cards, personal loans, auto loans, and mortgages. Inflation has remained steady, indicating that rate cuts make sense.
If the Fed follows up on its forecast, the stock market should continue to rally. These are some of the top ETFs that are poised to outperform when the Fed cuts rates.
Key Points
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The Federal Reserve plans to cut rates by 0.5% by the end of the year.
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These growth ETFs should outperform the market when the Fed finally makes its move.
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Roundhill Magnificent Seven ETF (MAGS)
The Roundhill Magnificent Seven ETF (BATS:MAGS) follows a similar model: focus on the best. It only contains the Magnificent Seven stocks and rebalances the portfolio each quarter to ensure an even allocation among all seven stocks. The fund is flat year-to-date, but lower interest rates should revitalize the Magnificent Seven stocks.
Each of the Magnificent Seven stocks is positioned to benefit from the AI boom, and with a relatively low 0.29% expense ratio, MAGS makes it easy to get exposure to all of them without any filler stock picks.
VanEck Semiconductor ETF (SMH)
The VanEck Semiconductor ETF (NASDAQ:SMH) prioritizes semiconductor stocks that are leading the charge in the AI boom. These stocks faced a lot of uncertainty at the start of the year due to tariffs and DeepSeek. However, most of those concerns are in the rearview, and lower interest rates are a massive tailwind.
The ETF has a 0.35% expense ratio and is up by 8% year-to-date. The fund places a lot of trust in a few holdings. Nvidia (NASDAQ:NVDA), Taiwan Semiconductor (NYSE:TSM), and Broadcom (NASDAQ:AVGO) make up more than 40% of the fund’s total assets.
Invesco NASDAQ 100 ETF (QQQM)
This ETF mirrors the Nasdaq 100 and is a better long-term hold than the nearly identical and more popular QQQ ETF. That’s because QQQM has a lower expense ratio and a higher SEC yield than QQQ.
The Invesco NASDAQ 100 ETF (NASDAQ:QQQM) prioritizes tech stocks and is positioned to thrive amid the AI boom. The fund had a slow start to the year but is now up by about 4% year-to-date. It has a 0.15% expense ratio and puts a lot of its assets behind the Magnificent Seven stocks.
Vanguard Growth Index Fund ETF (VUG)
The Vanguard Growth Index Fund ETF (NYSEARCA:VUG) is another top pick that should deliver higher returns amid rate cuts. Shares are up by 2% year-to-date, but its long-term gains have been tremendous for patient investors.
The growth ETF has delivered an annualized 15.4% return over the past decade. It’s endured various economic booms and downturns while producing those returns for investors. Unsurprisingly, it is a tech-heavy ETF that puts roughly half of its total assets into the sector. The ETF also has a minuscule 0.04% expense ratio.
The post 4 ETFs That Could Soar as the Fed Cuts Rates This Year appeared first on 24/7 Wall St..
