Image source: Getty Images
Technology-related sectors posted some of the best returns after US interest rates were cut this time last year, and Macquarie analysts are tipping more of the same this time around, with stocks exposed to the artificial intelligence boom to do particularly well.
Overnight, Australian time, the US Federal Reserve cut interest rates by 25 basis points, and market watchers expect further rate cuts this year.
Macquarie analysts, in a research note entitled "Fed adds fuel to AI boom", said that the investment strategy that worked after rate cuts in 1998 also worked when rates were cut in September last year.
They said in both cases, stocks outperformed bonds, and "technology-related sectors had some of the best returns''.
The Fed has signalled cuts due to the recent weakness in the US labour market. However the broader US growth slowdown that hit the US economy in the first quarter of 2025 is not present. In short, we are in a market where US growth appears to be improving… and we are adding more liquidity.
Macquarie said the best-performing sectors in the US since September last year were technology-related and included autos, including Tesla, semiconductors, and media.
In Australia, consumer spending data has continued to rebound strongly, Macquarie said, adding that Reserve Bank of Australia cuts "should support spending growth and maintain investor optimism over the cyclical recovery in Australia''.
Macquarie analysts said they added more tech and artificial intelligence exposure to their ideal portfolio, adding more weight in data centre operator NextDC Ltd (ASX: NXT) and recruitment website company Seek Ltd (ASX: SEK).
Macquarie has a price target of $22.30 on NextDC shares against the current price of $17.69 and a price target of $32.50 for Seek against $28.70.
