The Federal Reserve is expected to announce lower rates during its March meeting. That March FOMC meeting takes place over a two-day span from March 19th to the 20th. During this time, it can be hard to find stocks to buy. However, these ones are certainly worth considering grabbing beforehand.
The stock market should rally on lower rates since the cost of borrowing money will go down. Companies can then tap into more leverage and refinance their existing debt to secure lower interest rates.
Some stocks are better suited for a decrease in the Effective Federal Funds Rate. Growth stocks tend to gain the most from these policies, and you may want to consider these three picks.
Cloudflare (NET)
Cloudflare (NYSE:NET) helps make the internet more secure by offering cloud services. The company has more than 182,000 paying customers who range from small businesses to publicly traded companies. Approximately 30% of Fortune 1,000 companies use Cloudflare to keep their websites secure.
Cloudflare offers enticing revenue growth and is narrowing its losses. The cloud services provider reported 32.3% year-over-year net income growth. The firm also reduced its net losses by 44.7% year-over-year.
The Fed’s decision to lower rates can help Cloudflare turn the corner and become a profitable enterprise. This shift would increase the stock’s value proposition for investors.
Cloudflare is also a momentum stock, the type of asset that can rally higher than the market on good macroeconomic news. The company’s shares increased by 78% over the past year and are up by 352% over the past five years. Cloudflare is likely to march higher if the Fed cuts rates in March.
Alphabet (GOOG, GOOGL)
Lower interest rates encourage businesses to take more risks and reach more people. Rather than playing defense and looking for cost-cutting measures, companies may put more money into advertisements due to lower rates. They will feel more comfortable using leverage to offer a new product or service and use search engine advertisements for additional exposure.
Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) is a primary beneficiary of this trend. The company has the largest search engine and video platform under the same umbrella. For years, Alphabet has been one of the top stocks to buy.
Ad revenue already ticked up in 2023 compared to 2022. For instance, Alphabet reported 11% year-over-year growth in the third quarter of 2023. That’s an improvement from 6% year-over-year revenue growth in Q3 2022.
Alphabet’s Google Cloud division would also benefit from lower interest rates. Potential clients would have more financial flexibility to use Google Cloud. Existing clients may also decide to increase their annual payments to access more features.
Nvidia (NVDA)
Nvidia (NASDAQ:NVDA) is at the center of a megatrend. The demand for artificial intelligence is heating up and has sent this stock soaring by 233% over the past year. Shares have gained an even more impressive 1,386% over the past five years.
Lower interest rates will give more businesses the extra funds to invest in artificial intelligence tools and initiatives. That bodes well for Nvidia, and even with sky-high interest rates, the company has grown massively.
Nvidia reported 206% year-over-year revenue growth in the third quarter of fiscal 2024. The company’s revenue also exhibited 34% sequential revenue growth. Net income growth was even better. A 49% sequential gain and a 588% year-over-year gain demonstrate the high potential of this stock.
Growth rates won’t stay that high forever, but lower interest rates can give these incredible growth rates some room to continue. Nvidia has been a winner in the AI industry, and lower interest rates will help Nvidia expand its position. If the stocks to buy we mentioned, this is where you should start.
On this date of publication, Marc Guberti held long positions in NET and NVDA. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
