Noor Capital | Interview with Mohammed Hashad on Kuwait TV – Sept 23, 2024

In an interview conducted by Kuwait Television, Mohamed Hashad, Head of Research and Development at Noor Capital and a member of the American Association of Technical Analysts, commented and analyzed the performance of key assets in the financial markets.

Wall Street’s Collective Gains and Weekend Variation

Over the past week, all major Wall Street indices experienced collective gains, although some variation was noted during the weekend trading session. These robust gains were primarily driven by the Federal Reserve’s recent decision to cut interest rates by 50 basis points, signaling the end of the monetary tightening era that lasted for four years. This move has significantly increased market liquidity, boosting investors’ appetite for equities, and is reflected in the strong performance of the main US market indices.

The variation observed over the weekend can be attributed to investors taking a moment to reassess the economic outlook following a long streak of gains. There’s a state of division in the market currently as investors debate whether the Federal Reserve will implement another 50 basis point cut in the upcoming meeting or if the recent cut is sufficient. Additionally, the upcoming US presidential elections in November are contributing to this period of fluctuation, and it’s likely that this state of variance will persist until a clearer political picture emerges.

Company Performance Versus Interest Rates: A Closer Look

Interestingly, the recent market activity suggests that company performance has had a more substantial impact on stock movements than the Federal Reserve’s interest rate decisions. A prime example of this is Nvidia, which has experienced a strong decline, followed by a recovery and subsequent rally. Such fluctuations highlight the fact that the earnings results and business outlooks of heavyweight companies often play a crucial role in influencing overall market sentiment.

Investors view these leading companies as indicators of sectoral health and potential economic trends, which explains why their performance can create ripples across the broader market. In times of uncertainty, companies with strong fundamentals can act as a guiding light, offering insights into future economic trajectories.

Winners and Losers of the Interest Rate Cut

The Federal Reserve’s decision to reduce interest rates is designed to stimulate economic growth, but it inevitably produces both winners and losers in the market.

Winners:

1. Borrowers: With lower borrowing costs, individuals and businesses find it more affordable to take on loans, making it easier to finance investments and expansions.
2. Shareholders and Stock Investors: As interest rates decline, investors often shift their funds from fixed-income assets like bonds to equities, seeking higher returns. This transition tends to drive up stock prices.
3. Companies and Business Owners: The reduced cost of borrowing encourages companies to expand, invest in new projects, and pursue growth opportunities, which can lead to increased profitability.
4. The Labor Market: As businesses expand, they are likely to hire more employees, which boosts employment levels and can contribute to overall economic growth.

Losers:

1. Depositors and Certificate Holders: Individuals who rely on interest income from bank deposits and certificates of deposit face lower returns due to reduced interest rates.
2. The US Dollar: The currency tends to lose its attractiveness compared to others when interest rates fall, leading to a potential decline in its value.
3. The Banking Sector: Banks often experience a squeeze on profit margins as the difference between the interest they pay on deposits and the interest they charge on loans narrows.
4. The Bond Market: Lower interest rates diminish the appeal of bonds, as they offer a fixed return, making them less attractive to investors seeking higher yields.

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