Last Wednesday, the Fed unexpectedly announced a 50 basis point rate cut, which surprised many market observers. Kenny Polcari, Chief Market Strategist at SlateStone Wealth, said in an interview that the United States is facing a "very chaotic presidential election, it's been five weeks... and the Fed usually shouldn't make significant rate hikes or cuts in this situation. This rate cut is a significant adjustment." He called it a "crisis-level rate cut" and added, "People are wondering, what does this really mean? Fed Chairman Jerome Powell emphasized that this significant rate cut does not mean an increased risk of economic recession. You can see steady economic growth, declining inflation, and a strong labor market. So, I don't think there is such a risk right now."

Industry Preference

When asked how to allocate investment portfolios in this background, Polcari said that most of his investments are in stocks, with a small portion in fixed income. In terms of sectors, he avoids technology stocks and focuses on utilities, "high dividend-paying energy stocks," consumer goods, finance, and basic materials. "These are market sectors that may perform well even in an economic slowdown. I will give technology stocks some time, let them pull back before considering increasing investments," said Polcari.

"Perfect Stocks"

One of the stocks he is bullish on is $Energy Transfer (ET.US)$, which is a midstream energy services company. Polkari believes it is the 'perfect stock' to deal with rate cuts. He likes that the company is 'top-notch in its sector,' and pays a 'generous dividend of 7.99%.' Energy Transfer's stock price has risen by about 17.4% since the beginning of the year. According to FactSet data, out of the 20 analysts covering the stock, 18 gave it a buy or hold rating, while 2 maintained a hold rating. The analysts' average target price is $19.25, indicating a potential upside of nearly 19%.

Biotech Investment

Polarcarri is bullish on the pharmaceutical company, amgen.$Amgen (AMGN.US)$ Also bullish, due to its new product pipeline. These new products include a GLP-1 drug named MariTide, which can be used through monthly injections compared to other drugs on the market that typically require weekly dosages; in addition, there is a weight loss drug undergoing trials with the US Food and Drug Administration. Polarcarri stated that the company expects to "announce positive results early next year." As of now, amgen's stock price has risen by more than 17%. Among the 31 analysts covering the stock, 15 recommend a buy or shareholding rating, 14 maintain a hold rating, and 2 recommend a sell rating. According to FactSet data, amgen's average target price is $325.33, indicating a 3.6% downside risk.

"Discounted" technology stocks

Bullish on the technology sector, Polarcarri is optimistic. $ASML Holding (ASML.US)$He mentions this stock is "on sale", having dropped approximately 20% to 25%, very similar to nvidia (NVDA.O) - it sits at the intersection point of the entire technology trade," he explains. Asml's stock trades on the Euronext Amsterdam and nasdaq exchanges. Year-to-date, its stock price has risen by about 5.1%. Among the 38 analysts covering the stock, 29 recommend a buy or shareholding rating, 8 maintain a hold rating, and 1 recommends a shareholding rating. According to FactSet data, asml's average target price is 1,057.52 euros (approximately $1,170), indicating a 46.2% upside potential. The high-tech machines manufactured by this Dutch company form the basis of manufacturing the most advanced chips for the world's largest chip makers. Polarcarri adds:"As businesses in all industries globally are utilizing ai to transform their operations, asml will become an important company like nvidia. So, when it is on sale, you should seize the opportunity."

Editor/rice