2 ASX 200 shares that could surge in 2024 if the RBA cuts interest rates

Rate hikes are over or very close to it, experts reckon. When they come down sooner or later, these stocks could go berserk.

| More on:
Female miner smiling at a mine site.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

It's been a tough couple of years for many Australians, especially those with a mortgage.

The Reserve Bank of Australia raising interest rates 12 times in 13 months, or 13 times in 18 months, is a phenomenon that's rarely seen.

It had to be done, to quell inflation from damaging levels.

But now that inflation seems to be settling down, there is great hope among economists and the public that we have seen the last of the rate hikes. 

Or maybe just one more, and that's it.

While no one has a crystal ball to judge whether that's true, in practical terms the rate increases have to come to an end sooner or later.

Then after that, there might even be a reduction in interest rates to get the economy kick-started again.

And when it does, there are certain businesses that will thrive much more than others.

Here are couple of stocks from the S&P/ASX 200 Index (ASX: XJO) that have the potential to rocket if rate cuts come:

'Valuation compares favourably to its peers'

Iron ore is very much a mirror of how well the economy is going.

It is a material that is essential for construction, and that sector only gets going when consumers and businesses are confident.

So if global economies receive a stimulatory boost from interest rate cuts, the building industry could be cheering.

And that's where Champion Iron Ltd (ASX: CIA) comes in.

Champion shares are 1.6% down on 12 months ago, and that makes the price tempting to buy now, according to Fairmont Equities boss Michael Gable.

"This Canadian-based producer is trading on valuations which compare favourably to its peers," Gable told The Bull.

"We remain bullish regarding the outlook for iron ore in 2024."

Other professionals are also fans, with all seven analysts covering Champion Iron rating it as a buy on CMC Invest.

This American mob can't wait for interest rates to come down

Another victim of rising rates have been high-growth stocks, especially technology.

High interest rates harm the valuation of future-dependent companies, and Block Inc CDI (ASX: SQ2) was no exception.

Just in the first half of 2022, shares for the US fintech lost half its value.

Even within the tech sector, Block Inc was known to be profligate. Even its propensity to issue new shares to staff came into question as rates started creeping up.

But, to its credit, the company has listened to the markets and has made some changes.

"Block Inc outperformed in December following the release of its 3Q23 result the month prior, which exceeded investor expectations with respect to future cost discipline, and strong messaging about internal personnel productivity," read an ECP memo to clients.

"The result is an expectation of faster operating leverage to emerge across business units, with a plan to hit Block's 'rule of 40' in 2026."

So, in a leaner and fitter state than a couple of years ago, once rates come down Block Inc could be in an enviable position.

According to CMC Invest, all three analysts who monitor Block Inc shares reckon it's now a strong buy.

Motley Fool contributor Tony Yoo has positions in Block. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Block. The Motley Fool Australia has positions in and has recommended Block. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Investing Strategies

Woman on a swing at a beach, symbolising passive income.
Dividend Investing

Overinvested in Fortescue shares? Here are two alternative ASX dividend stocks

Let’s unearth some other passive income opportunities.

Read more »

A person stands still with a virtual reality technology headset on and arms outstretched, surrounded by frozen ice and snow.
Dividend Investing

I'd make my money stretch further with these 3 ASX passive income shares

I think these three ASX passive income stocks can keep delivering for years to come.

Read more »

Person with a handful of Australian dollar notes, symbolising dividends.
Investing Strategies

Want cash like Warren? How to stack paper without ditching ASX shares

Life is about trade offs.

Read more »

A business woman flexes her muscles overlooking a city scape below.
Blue Chip Shares

Brokers name 2 strong ASX 200 shares to buy now

These shares are among the top picks on the benchmark ASX 200 index according to analysts.

Read more »

Different Australian dollar notes in the palm of two hands, symbolising dividends.
Dividend Investing

3 high-yield ASX dividend stocks named as buys

Analysts think big returns could be on offer with these buy-rated stocks.

Read more »

A happy boy with his dad dabs like a hero while his father checks his phone.
Small Cap Shares

Buy these small cap ASX shares for big juicy returns

Analysts have good things to say about these buy-rated stocks.

Read more »

Rail worker in hard hat kneels over train tracks inspecting tracks
Dividend Investing

A fund manager is backing this fallen ASX 200 dividend giant as a turnaround buy

This ASX 200 stock could be on track for a turnaround.

Read more »

Young woman using computer laptop smiling in love showing heart symbol and shape with hands. as she switches from a big telco to Aussie Broadband which is capturing more market share
Growth Shares

Goldman Sachs loves these ASX 200 growth shares: Do you own them?

Why is the broker bullish on them? Let's find out.

Read more »