Last weekend, the global central bank annual meeting at Jackson Hole came to a successful conclusion. Federal Reserve Chairman Powell made it clear that the time for policy adjustments has come.

In fact, Powell is not the only central bank governor at this central bank annual meeting who hinted at a gradual reduction in interest rates. The European Central Bank and the Bank of England have also shown signals of further potential action. The difference from the Federal Reserve is that these two major European central banks have already cut interest rates once before.

This marks the end of the era of high borrowing costs around the world as the global economy gradually recovers from the high inflation period after the epidemic, and the curtain of major central banks' loose policies will also be opened next month.

As the Federal Reserve's monetary policy shifts from tightening to easing, astute investors are further asking which assets are likely to have investment opportunities as global monetary policy shifts, interest rates fall, and a new round of liquidity loosening cycle is imminent.

The US medical industry may be one of the answers.

Looking at previous rate cuts by the Federal Reserve, biotech stocks tend to experience a strong rally. The article"Leading the way! If the Fed enters a rate-cutting cycle, these industries are poised to be potential winners."has also compiled that healthcare performs exceptionally well throughout the entire rate-cutting cycle.

Under the expectation of interest rate cuts, the medical industry is quietly reaching new highs.

From the overall market this year, aside from the 'magnificent 7' in technology, in fact, biomedical stocks are quietly rising.

Among them, the weight loss drug giant $Eli Lilly and Co (LLY.US)$ Nvidia. $Novo-Nordisk A/S (NVO.US)$ , the surgical robot giant $Intuitive Surgical (ISRG.US)$ , American medical giant $HCA Healthcare (HCA.US)$ , global cardiovascular giant $Boston Scientific (BSX.US)$ , global immunotherapy giant $Regeneron Pharmaceuticals (REGN.US)$ , pharmaceutical giant $AstraZeneca (AZN.US)$Please use your Futubull account to access the feature.$AbbVie (ABBV.US)$Please use your Futubull account to access the feature.$Novartis AG (NVS.US)$ global orthopedic giants, including $Stryker Corp (SYK.US)$ have all reached historic highs within this year, with gains ranging from 18% to 64%, and the highest increase even exceeding $NVIDIA (NVDA.US)$other technology giants outside.

In addition to these pharmaceutical giants, the US stock market also offers many biotech-related ETFs worth investors' attention, including $SPDR S&P Biotech ETF (XBI.US)$Please use your Futubull account to access the feature.$iShares Biotechnology ETF (IBB.US)$Please use your Futubull account to access the feature.$ARK Genomic Revolution ETF (ARKG.US)$Please use your Futubull account to access the feature.$First Trust Exchange Traded Fund Nyse Arca Biotechnology Index Fund (FBT.US)$Please use your Futubull account to access the feature.$Direxion Daily S&P Biotech Bull 3x Shares ETF (LABU.US)$ From the above figure, it can be seen that except for ARKG under Wood's control, which performed poorly this year, the other ETFs recorded gains of about 8%-17%.

Why should we allocate to the healthcare sector during interest rate easing cycles?

Market participants believe that the current time may be a good opportunity to invest in the biopharmaceutical sector during interest rate easing cycles, as the biopharmaceutical sector usually performs well.

The biopharmaceutical industry has a long research and development cycle, requires large investments, and incurs high costs. In the early stage, it heavily relies on external funding. When US bond interest rates are high, it means that low-risk investments have higher returns, and funds are reluctant to take on higher risks by investing in equity assets such as innovative drugs that require intensive research and development.

As US bond interest rates fall, market risk sentiment will be boosted, the difficulty of financing for innovative pharmaceutical companies will relatively decrease, and more funds will flow back into the stock market. The healthcare sector will be favored by more funds, bringing positive prospects for the innovative drug sector.

In addition, one of the main reasons that some large-scale and cash-flow-stable pharmaceutical companies can stand out in a rate-cutting cycle is that they are defensive stocks, with sticky demand that is not dependent on economic cycles. Many healthcare stocks are dividend stocks and also well-known for their huge share buybacks, making healthcare stocks very attractive during economic downturns.

Is the expectation of a rate cut in the USA reaching its peak? Interest rate-sensitive long-term bonds, low-priced stocks, biotechnology stocks, and other assets are benefiting from the rebound, with early deploying investors earning profits! If you are still unsure about which assets to allocate during a rate-cutting cycle? How to allocate?Check out the 'Rate-Cutting Investment Lazy Investor Package' course for the most comprehensive strategies >>

Editor/Somer