HomeMost PopularInvestingInterest Rates May Soften: Top Stocks to Ride the Wave

Interest Rates May Soften: Top Stocks to Ride the Wave

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After facing the full wrath of soaring inflation, the possibility of a more forgiving economic environment now looms over the horizon. The Federal Reserve aggressively hiked interest rates by 500 basis points to curb runaway inflation. However, with inflation now showing signs of abating, the time for economic respite may be near.

Investors have increasingly begun to entertain the notion of a potential softening of interest rates sooner rather than later. The federal funds futures market indicates that the odds of an initial interest rate cut in the first half of 2024 have risen, with the likelihood of a May rate cut climbing from 35% a month ago to 49% today.

CME Group
Image Source: CME Group

Impending Rate Cuts and Market Implications

The interest rate set by the US central bank is a pivotal factor influencing market dynamics. Lower interest rates translate to more accessible credit and increased liquidity, pushing investors towards higher-yielding but riskier investments. This shift tends to favor growth-oriented stocks and induces multiple expansion, propelling this category of stocks upwards.

In this changing landscape, the mid-cap technology sector is poised to emerge as one of the primary beneficiaries, presenting an opportune situation for investors.

Upwork Inc. (UPWK)

The online platform that links businesses with freelance professionals, Upwork UPWK continues to attract attention. Upwork has garnered a Zacks Rank #1 (Strong Buy) rating with a striking uptick in its FY23 earnings estimates by 30% over the last month. Projections foresee a substantial jump from -$0.06 to $0.48 YoY.

Zacks Investment Research
Image Source: Zacks Investment Research

Upwork stock has demonstrated a robust resurgence this year, displaying a promising technical momentum setup. A potential breakout above the $14.75 mark could propel the stock to new 18-month highs.

Image Source: TradingView

CrowdStrike (CRWD)

As a prominent cybersecurity firm, CrowdStrike CRWD anticipates substantial sales and earnings growth, with annual sales forecasted to rise by 35% and EPS by 83%. The company commands a Zacks Rank #2 (Buy) rating, indicative of its favorable earning revisions.

Zacks Investment Research
Image Source: Zacks Investment Research

CrowdStrike has been at the forefront of sectoral upswings and recently surged by 10% following a breakout from a bullish pattern.

Image Source: TradingView

Cloudflare, Inc. (NET)

Cloudflare NET offers a suite of cloud-based services to enhance website and application security, performance, and reliability. With a 32% annual sales growth projection and EPS set to surge by over 250% YoY, Cloudflare appears primed for further growth. Bullish momentum has been driving NET stock to new highs, supported by breakouts from recent consolidations.

Zacks Investment Research
Image Source: Zacks Investment Research

Image Source: TradingView

Embracing the Shift

As the market braces for the evolving interest rate environment, the prospect of buoyant market rallies, particularly in the high-growth mid-cap tech sector, gains credence. Amidst the anticipated changes, these stocks could offer investors a promising trajectory for capital appreciation.

Zacks Names β€œSingle Best Pick to Double”

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