The Federal Reserve surprised several market watchers by unexpectedly announcing a 50 basis point rate cut last Wednesday. Kenny Polcari, chief market strategist at SlateStone Wealth, said in an interview that the U.S. is facing "a very chaotic presidential election, and it's five weeks away... and the Fed should not normally make big rate hikes or cuts in this situation. The rate cut they made this time is a big adjustment." He called it a "crisis-level rate cut," adding: "People are thinking, what does this mean? Fed Chairman Jerome Powell emphasized that this big rate cut does not mean an increased risk of recession. You can see that economic growth is solid, inflation is falling, and the labor market is still strong. So, I don't think there is such a risk now."

Industry Preference

When asked how to allocate his portfolio in this context, Porcari 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 concentrates on utilities, "high dividend-paying energy stocks", consumer goods, financials and basic materials. "These are all market sectors that are likely to perform well even in a slowing economy. I would give technology stocks some time to pull back before considering adding investment," Porcari said.

“Perfect Stock”

One of his favorites is Energy Transfer (ET.N), a midstream energy services company. Polcari sees it as the "perfect stock" to ride out rate cuts. He likes that the company is "best in class" in its space and pays a "generous 7.99% dividend." Energy Transfer shares are up about 17.4% since the beginning of the year. Of the 20 analysts covering the stock, 18 have a buy or overweight rating, and two have a hold rating, according to FactSet. The average analyst price target is $19.25, suggesting nearly 19% upside potential.

Biotech Investment

Porcari is also optimistic about biopharmaceutical company Amgen (AMGN.O) due to its pipeline of new products. These new products include a GLP-1 drug called MariTide that can be used through monthly injections, while other drugs on the market generally require weekly dosing, as well as a weight loss drug that is undergoing trials with the U.S. Food and Drug Administration. Porcari said the company expects to "report positive results early next year." So far, Amgen's shares have risen more than 17%. Among the 31 analysts covering the stock, 15 have a buy or overweight rating, 14 maintain a hold rating, and 2 have a sell rating. According to FactSet data, Amgen's average target price is $325.33, indicating a downside risk of 3.6%.

Discounted tech stocks

As for the tech sector, Porcari is bullish on ASML (ASML.O), which he says is "on a discount." The stock is "down about 20% to 25% or so, very similar to Nvidia (NVDA.O) - it's at the intersection of the whole tech trade," he explained. ASML's shares trade on Euronext Amsterdam and Nasdaq. Year to date, its shares are up about 5.1%. Of the 38 analysts covering the stock, 29 have a buy or overweight rating, eight maintain a hold rating, and one has an underweight rating. ASML's average price target is 1,057.52 euros (about $1,170), indicating a 46.2% upside potential, according to FactSet. The Dutch company makes high-tech machines that are the basis for the world's largest chipmakers to manufacture their most advanced chips. "ASML is going to be as important a company as Nvidia as industries around the world are using artificial intelligence to transform their businesses," Porcari added. "So when it's on a discount, you should take advantage of it."

Article forwarded from: Jinshi Data