3 Utility Funds To Play Safe Ahead Of A Likely Fed Rate Cut
Zacks Investment Research | Jul 18, 2019 10:50PM ET
Trade-related issues have become a concern lately, as the United States and China sent mixed signals to each other. The already-imposed tariffs are in place even after trade talks resumed last month. This has left investors confused as they desperately await an easier monetary policy from the Fed.
In such a scenario, it would be prudent to invest in mutual funds that put their assets in safe-haven sectors such as utility.
Uncertainty Still Looms Over US-China Trade
There hasn’t been any substantial progress on tariff-related issues even after President Donald Trump and his Chinese counterpart met last month. In fact, the situation has gone downhill.
First, the number of companies moving their production units out of China has increased. More than 50 multinationals that include Apple (NASDAQ:AAPL), Dell and Nintendo are moving their units from China to escape tariffs, CNBC cited on Jul 18.
The trade dispute is already crushing the Chinese economy as the country registered its weakest quarterly economic growth in 27 years, at 6.2% in Q2. Trump’s tweet on Jul 15 claiming this was a result of U.S. tariffs caused much uproar. However, his claims were quickly dismissed by China.
Secondly, China brought in its commerce minister Zhong Shan into the trade negotiating team. Shan is considered a hardliner by a few officials in the United States, which could indicate that China wants to stand firm on its terms in the trade deal.
Given that U.S.-China trade relations are only worsening, a trade deal at this point is highly unlikely.
A Fed Rate Cut is Coming
In fact, Fed Chair Jerome Powell, in his congressional testimony earlier this month, indicated a possible rate cut at the FOMC meet scheduled for Jul 30-31. He cited trade uncertainties and weakness in global growth behind his dovish stance.
Also, New York Federal Reserve President John Williams’ speech this week appeared in sync with Powell. Williams (NYSE:WMB) said that cutting rates as the economy slows is an effective scheme for the Fed, especially when benchmark rates are already so low.
Further, the Zacks Investment Research
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