Why the Fed cutting rates is a 'two-sided coin' for tech

As the Federal Reserve gears up for its first interest rate cut, Harvest Portfolio Management CIO and Wall Street Beats partner Paul Meeks joins Catalysts to discuss how easing rates could weigh on the tech sector.

"It's a two-sided coin. One is, yes, as rates go down, the discount rate to value, aggressive growth, and other tech stocks brings much higher valuations. That's the positive. On the other side of the coin is the reason that the Fed is lowering rates is now they've gone from being concerned about inflation to being concerned about a recession," Meeks explains.

He notes that tech companies are "somewhat positively correlated to the moves in the economy." He adds that despite a recession slowing the growth of tech, he still prefers to have exposure as AI remains a powerful theme.

For more expert insight and the latest market action, click here to watch this full episode of Catalysts.

This post was written by Melanie Riehl

Video Transcript

When you think about what's been well documented over different cycles of rate cuts.

Technology has been one of the beneficiaries of, of easy money policies.

Do you expect that to be the same this time around as largely anticipated, the FED is going to begin cutting interest rates in September here.

Well, you raised a great question because it's a two sided coin.

One is yes, as rates go down the discount rate to value aggressive growth and other tech stocks brings much higher valuations.

That's the positive.

On the other side of the coin is the reason that the FED is lowering rates is now they've gone from being concerned about inflation to being concerned about a recession and no matter what tech companies say, they are somewhat positively correlated to the moves in the economy.

So I see it both ways but over time that and on the other side of the positive ledger, the A I boost makes me still want to stick in here.

Paul Meeks harvest portfolio management, Cio and a Wall Street beats partner.

Thanks so much, Paul.

Good to see you.

Thank you.