Bitcoin price today: falls to 2-week low below $113k ahead of Fed Jackson Hole
Investing.com -- Small caps and homebuilders are the most at risk if the Federal Reserve strikes a hawkish tone at Jackson Hole, according to Barclays (LON:BARC).
Barclays’ economists maintain a contrarian stance, expecting no rate cut in September.
“With some segments of the equity market having moved swiftly to reprice rates from ‘higher for longer’ to ‘lower and sooner’, we looked at potential vulnerabilities in the event of a hawkish surprise at the symposium,” the bank said.
The note pointed to trading patterns after July’s inflation report, when “the futures-implied probability of a September rate cut spiked from 87% to over 100%.”
In that window, “small caps (especially small-cap value) and homebuilding stocks [were] the biggest perceived beneficiaries of an immediate rate cut, followed by banks and retail,” Barclays observed.
While fundamentals for small caps have improved, the bank argued much of their recent rally has been tied to expectations of looser policy.
“We expect small caps (especially small-cap value) to be among the first to trade off if Fed messaging disappoints,” Barclays wrote.
Homebuilders also look exposed. “Looking at GICS L4 sub-industry metrics, homebuilders look more vulnerable to a hawkish surprise than building products stocks,” Barclays added, noting that higher interest rates tend to weigh more heavily on housing demand.
Banks could see volatility too, though Barclays was more constructive. “We would view any sell-off in response to a hawkish surprise as a buying opportunity for the Financial sector, and we maintain our Positive view,” the analysts wrote.
The Jackson Hole symposium begins Thursday, with markets watching closely for policy signals.