CITIC Construction Investment: Interest rate cuts are expected to significantly stimulate market vitality, recommending leading companies in the home appliance export chain and tool sector

According to the Zhitong Finance APP, CITIC Construction Investment has released a research report stating that a new round of interest rate cuts by the Federal Reserve is about to begin, benefiting the U.S. real estate chain. Historically, a reduction of 150-200 basis points in mortgage rates can lead to significant market movements, with beneficiary stocks typically seeing valuations lead the way. The introduction of the Inflation Reduction Act has significantly increased the U.S. fiscal gap, making room for interest rate cuts. Under the pressure of a high-interest rate environment, the current U.S. real estate market is at a low point and is in urgent need of a rebound. Interest rate cuts are expected to significantly stimulate market vitality, and it is recommended to seize investment opportunities in home appliance and power tool export companies during the interest rate cut cycle. Leading companies in the home appliance export chain and tool sector are recommended.

CITIC Construction Investment's main points are as follows:

Interest Rates - Real Estate - Precise Transmission in the Late Cycle, U.S. Real Estate Chain β Welcomes Systematic Reversal

The strong cyclicality of the U.S. home appliance and tool industries is reflected in the demand closely following changes in the real estate cycle, with the revenue fluctuations of late-cycle leaders almost synchronizing with the trends in U.S. real estate home sales. Currently, the U.S. real estate market is at a historical low turning point, and tool demand is expected to enter a recovery phase alongside the real estate cycle.

Question 1: What is the outlook for stock price space and rhythm during the interest rate cut cycle?

In terms of space, the upside potential for U.S. late-cycle stocks is quite considerable. Reviewing the three major interest rate cut cycles since the 21st century, a reduction of 150-200 basis points in mortgage rates can lead to a doubling of late-cycle companies' stock prices. In terms of rhythm: The introduction of the dot plot by the FOMC in 2012 enhanced the predictability of interest rate policies, combined with the learning effect from past interest rate-real estate transmissions, significantly shortening the lag time of late-cycle stock prices in response to Federal Reserve interest rate cuts.

Question 2: How to view the certainty and magnitude of interest rate cuts?

Currently, the U.S. federal funds rate is in a high-level retreat. The debt increment brought by the Inflation Reduction Act will further increase interest pressure. To mitigate the risks associated with high interest expenses and alleviate the rising unemployment pressure, significant interest rate cuts are an inevitable policy choice for the White House. At the same time, with employment showing significant weakness, the Federal Reserve's policy focus is gradually shifting from controlling inflation to preventing recession, with expectations for rate cuts in September significantly increasing.

Question 3: How to understand the current position of the U.S. real estate market?

The U.S. real estate market is at its lowest transaction level in nearly 20 years, with strong demand momentum, but suppressed by the "rate lock-in" effect, the bottom has been building momentum for 2-3 years. The initiation of interest rate cuts, combined with millennial home buying, will effectively activate the U.S. real estate market. There are concerns about the effectiveness of moderate interest rate cuts in a high-interest environment—referring to the recovery experience during the stagflation period of the 1980s, moderate interest rate cuts in extremely high-interest environments can also lead to significant boosts in the real estate chain.

Real Estate Recovery Combined with Replacement Cycle, the Turning Point for Late-Cycle Real Estate Sector Has Arrived

As expectations for U.S. interest rate cuts gradually become clearer, U.S. mortgage rates are expected to decline, and the U.S. real estate market is anticipated to gradually recover in the first half of 2026, further boosting the prosperity of the home appliance and tool industries. In terms of tariffs, the tariff pressure on Southeast Asian production capacity is not higher than that of domestic production capacity in 2024, and the overall impact after capacity transfer is controllable.

Risk Warning: Risks of macroeconomic fluctuations, overseas recession risks, changes in retailer replenishment policies, intensified market competition, etc