The traditional defense strategy of the Federal Reserve's 'non-recessionary rate cut' no longer works.

With the Fed's first easing cycle in four years, has the stock market's interest rate cut trading manual changed?

Generally, when the Fed cuts interest rates to boost the economy, investors often choose defensive stocks and high dividend stocks for hedging, avoiding growth stocks, including the technology sector, which are more susceptible to macroeconomic influences.

However, due to the resilience of the US economy during this interest rate cut, the result was led by technology stocks, a record high in the stock market, a continued rise in the economy, and a good outlook for corporate profits after the rate cut.

From the fund flow after the interest rate cut, investors are shifting from defensive stocks to cyclical stocks.

According to Goldman Sachs' bulk brokerage business data, last week, the Hedging Fund bought TMT stocks (technology, media, and telecommunications) for the third consecutive week, with a net position reaching its highest level in four months, while defensive stocks had their largest net sales in over two months, with the outflow of funds from utility stocks reaching the largest scale in more than five years.

Frank Monkam, Senior Investment Portfolio Manager at Antimo, said:

"The Fed's significant rate cut in a fairly loose financial environment is a clear signal to the market that an aggressive Holdings position should be taken.

"Traditional defensive stocks such as utilities or consumer stocks may not have much appeal."

Why is this interest rate cut different from history?

Why is this rate cut referred to as a "non-recessionary rate cut"?

According to Bank of America's data, 8 of the 9 easing cycles since 1970 occurred during corporate profit deceleration. However, the bank's stock and quant strategy head, Savita Subramanian, wrote in a report to clients: The current situation is that profits are expanding, which is beneficial to cyclical and large-cap stocks.

This means that the Fed is not cutting interest rates due to an economic recession, Subramanian said:

"The Fed has no script - every easing cycle is different."

However, looking at the historical interest rate cut cycles, the Fed's rate cuts often drive the overall market to pump.

According to Bank of America data, in the absence of an economic recession, the S&P has averaged a 21% pump in the year following the first rate cut by the Fed since 1970.

Investment Style Switch: Banks, Technology, Real Estate in Demand

So, what kind of investment style does the Fed's "non-recessionary rate cut" bring this time?

As Subramanian said, investors are turning to cyclical stocks, large-cap stocks, and other industries that are in the rise.

Benefiting from the stimulus effect of loose environment on consumption, industries such as real estate and automobiles are also expected to achieve rise. Phil Blancato, CEO of Ladenburg Thalmann Asset Management, said:

"You will see excited consumers - the decline in mortgage loan Intrerest Rate levels will stimulate consumption, whether in the housing market or the automotive market."

The utility stocks in traditional trading strategies have also remained hot, as the AI investment boom has increased the attractiveness of the industry. In fact, utility stocks have pumped 26% cumulatively this year, making it the second best-performing sector in the S&P.