Impact of Fed's Rate Decision on Magnificent 7 Stocks: A Poll Overview

In January, the Federal Reserve decided to leave the federal funds rate unchanged at 4.25% to 4.5%. This decision follows three consecutive rate cuts totaling 100 basis points earlier in 2024. A recent poll conducted by Benzinga sought to determine which stock among the ‘Magnificent 7’ would be most adversely affected by the Fed's decision.

Key Developments: The Federal Reserve's decision to maintain the current interest rate comes after an extended period of rate cuts aimed at making borrowing more affordable. Lower interest rates typically encourage borrowing, which can stimulate economic growth. The Magnificent Seven stocks represent some of the largest companies globally, often showing resilience to economic fluctuations. Reduced borrowing costs may particularly benefit those companies that specialize in high-ticket items.

Benzinga posed the question: "Which Magnificent 7 stock will feel the most negative impact from the Fed's rate decision?" The responses from readers were revealing:

• Tesla Inc (TSLA): 39%
• NVIDIA Corporation (NVDA): 30%
• Amazon.com Inc (AMZN): 9%
• Microsoft Corporation (MSFT): 9%
• Apple Inc (AAPL): 8%
• Meta Platforms (META): 5%
• Alphabet Inc (GOOGL): 0%

Tesla received the bulk of the votes, with 39% indicating it would be most impacted by the Fed's decision. This concern largely stems from the company's reliance on financing for its premium products. Following Tesla, NVIDIA was identified by 30% of respondents, likely owing to its critical role in powering technology growth across various industries.

The poll revealed that Amazon, Microsoft, Apple, and Meta were perceived to have similar levels of vulnerability. Strikingly, Alphabet did not receive any votes, indicating that readers believe the company may not suffer from the Fed’s rate decisions.

Relevance of the Fed's Decision: Economists now speculate that the first potential rate cut from the Fed might not occur until June or later this year, with varying probabilities predicting cuts in March, June, and September. Benzinga also probed readers on their opinions regarding the Fed's recent decision. A significant majority, 72%, supported the decision to keep rates steady. Only 22% felt a rate cut was necessary, while 5% believed rates should have been increased.

The Fed released a statement indicating that “economic activity has continued to expand at a solid pace,” while also noting that inflation, although gradually moving closer to the 2% target, remains somewhat elevated. This statement was viewed less positively compared to comments made in December.

Former President Donald Trump criticized the Fed's decision, emphasizing the need for increased rate cuts and claiming ineffective bank regulation. He asserted that his administration, if re-elected, would focus on expanding lending for Americans and businesses alike.

The next Federal Open Market Committee meeting is set for March 18-19, where further decisions regarding interest rates will be deliberated.

Fed, Stocks, Poll