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The US Federal Reserve's decision to cut rates for the first time in two years in September has broader implications. Lower interest rates generally boost bond markets and stimulate the economy by making borrowing cheaper. This environment encourages investors to shift from defensive sectors like healthcare and utilities toward growth-oriented sectors such as technology, travel, retail, and luxury goods.
The Positive Spending Cycle
Lower borrowing costs often lead to increased consumer spending, creating a positive feedback loop. As consumers borrow and spend more, economic confidence grows, reinforcing perceptions of economic strength. This cycle can propel the markets upward, benefiting companies across various sectors and encouraging more investment inflows.