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As short-term rates fall amid the banking crisis, a handful of stocks, including chip names, will stand to gain, Jeffreys said. “If history is a guideline, the recent financial turmoil has been enough to stifle lending conditions as MM and credit spreads have shifted. Consequently, the Fed is finally getting what it wants – a mild recession/slowdown,” said strategist Sean Darby. clients in environment note. “The 2-year bond yield is trading below the Fed’s target for the first time since the start of the tightening – we remain longtime beneficiaries of the downward-sloping yield curve,” Darby said. The strategist noted that a sharp drop in the yield of 2-year bonds indicates worsening economic conditions. On Wednesday, the yield on 2-year bonds fell to 3.72%. This was the lowest level since September 13, 2022, when the yield fell to 3.505%. Meanwhile, the yield on the benchmark 10-year bond exceeded 3.388%. This is the lowest level since February 3, when the yield on 10-year bonds was only 3.365%. “Our US Recession Probability Indicator appears to be poised for an exponential move higher, which is not too different from other cycles,” Darby writes. However, there are stocks that benefit from falling short-term and long-term returns. Indeed, the names Jeffreys singled out mostly refer to tech and growth stocks, which are the companies that suffered the most when interest rates rose and their valuations declined. They will win if rates fall. Jeffries named Tesla on his list. Shares in the electric car maker fell 65% in 2022 as the Federal Reserve launched its latest rate hike campaign. The falling rate could support stocks, which are up about 44% in 2023. The firm recommends buying Tesla. Semiconductor stocks Lam Research and Advanced Micro Devices were also included in the list. Shares of both companies fell in 2022, with Lam down about 41% and AMD down almost 55%. Jeffries recommended buying both stocks. Lam is up almost 14% in 2023 and AMD is up 35%. Paycom Software and aerospace company name TransDigm Group were also cited in the Jeffreys report as beneficiaries of 2-year falling Treasury yields. Shares of both denominations are recommended for purchase. Paycom is down 10% in 2023 while TransDigm is up over 9%. — Michael Bloom of CNBC
Credit: www.cnbc.com /
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