Big Money Is Already Flowing Into These "Rate Cut" Stocks Congratulations! We’re geniuses. At least according to Michelangelo. Genius is eternal patience, he said. And we’ve demonstrated what felt like eternal patience waiting for the Federal Reserve to cut interest rates. Yesterday was the big day, and the central bank went big with an outsized half-point cut. But more importantly than the size, the Fed kicked off a rate reduction cycle with a bang. That bang was the starter’s gun. The floodgates are creaking open as record amounts of cash on the sidelines – a ginormous $6.5 trillion in money markets alone – starts pouring into stocks. It doesn’t take a Michelangelo-type genius to figure out why… or how this is a massive opportunity for smart investors. Simply put, the Fed’s rate cut will lower the return on that massive amount of cash in money markets and other interest-bearing accounts. This first move cuts their return by 10% or so with rates set to fall from 5% down to around 4.75%. The Fed itself projects two more cuts by the end of the year, resulting in a full percentage point slide that would amount to a nearly 20% slash in the return investors previously enjoyed. A 20% pay cut is strong motivation to look for another job. It’s also strong motivation to look for other investments. It’s already happening. Big Money investors began allocating their money for lower rates a while ago. The algorithms I designed to follow Big Money can see it, as well as the stocks its flowing into… These Stocks Rise When Rates Fall We talked in Monday’s Power Trends about how Big Money is already moving into smaller stocks in anticipation of lower rates. We see this same phenomenon in dividend-paying stocks. The SPDR S&P 500 High Dividend ETF (SPYD) has already soared 40% since last November. 
Rates should continue to fall, likely down to 2% or lower, where they spent most of the last decade. Investors increasingly look to earn 2.5%, 3%, 4%, and sometimes even more from stock dividends. And if you pick the right stocks, you can turbocharge those returns with rising share prices. Big Money has already started “chasing yield.” We see this clearly in my Quantum Edge system’s ETF rankings. My system analyzes ETFs in addition to stocks, and they are additional “x rays” to see Big Money flows under the surface. You might be a little surprised to know that four of the Top 10 ETFs in my system are utilities. Yep, boring old utilities. Utilities don’t grow rapidly, so they typically don’t score all that well. The only reason Big Money would be pouring in is dividend yields. These boring utilities have more than doubled the S&P 500 the last six months. 
That blue line is the Utilities Select Sector SPDR Fund (XLU), which is the top “ute” ETF with a strong Quantum Score of 71.5. The problem with ETFs is that they are big baskets of stocks that mimic indexes, which means you’re also stuck owning middling or even poor stocks. So, let’s drill down into the holdings. XLU’s top holding is NextEra Energy (NEE), one of the largest electricity generators in the U.S. It also produces renewable energy from wind and sun. NEE constitutes a hefty 14.5% of XLU. It yields a solid 2.4% and is the top-ranked utility stock in my system with a strong 79.3 Quantum Score. 
Source: TradeSmith Finance It’s no coincidence that NEE’s 62.5 Fundamental Score happens to be the highest in the ETF. Even so, growth stocks tend to rate much higher fundamentally than do utilities. And check out that Technical Score of 91.2. That typically signals a stock is overheated and primed for a pullback, which makes sense given NEE’s 40% run the last six months. My system picked up 13 Big Money buy signals in that time, shown by those green lights below. 
Source: MAPsignals.com Those green lights are not just heavy buying but are days that saw unusual buying. They are the hidden footprints of Big Money at work – the money that moves stocks. NEE’s Quantum Score puts it in our buy zone between 70 and 85, and while the data indeed points to higher prices over time, we may have seen the beginnings of a pullback today – a classic “buy the rumor, sell the news” phenomenon one day after the rate cut. I also see better dividend stock opportunities out there than most utilities – stocks that can pay a nice dividend but also generate significant share price gains. These are the stocks with big growth and superior fundamentals, strong technicals, and those Big Money inflows my algorithms detect. I’ll give you one example – a stock that’s up 37% since we added it in my TradeSmith Investment Report service a little over a year ago. S&P Global (SPGI) is a huge financial information and analysis company. But with most of that now done with software – like all of Wall Street’s algorithms and my Quantum Edge system – it falls into the Technology sector. 
Source: TradeSmith Finance That 79.3 Quantum Score is right in the middle of our buy zone. The 70.8 Fundamental Score is stronger than any utility. And that 85.3 Technical Score shows momentum that’s not overheated. SPGI’s yield is not the biggest you’ll see, currently 0.7%. But there are other key factors when analyzing dividends. One is the dividend payout ratio, which is how much of the company’s net income is paid to shareholders. SPGI’s is one of the strongest around at 44%. In addition, SPGI’s payout increased 8.4% in the past year and 64.3% the last five years, which boosts your yield over time. And when it comes to those Big Money buy signals, SPGI flashes a lot of green. 
Source: MAPsignals.com Yesterday’s rate cut was bullish for stocks in general. Combine it with election-year patterns and seasonal patterns and we have the fuel in place for a big end-of-year lift. Dividend stocks are one way to profit. So are smaller stocks. And in Saturday’s Power Trends, we’ll talk about another area of the market that’s already popping. Talk soon,  Jason Bodner
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