There are any number of sectors that traditionally benefit from interest rate cuts. Banks, building stocks and discretionary retail are some that enjoy sectoral rotations in the share market as rates fall. But this cycle is very atypical, with interest rates so far having a very limited impact on some and any of these, while others are already very overvalued with other factors at work.
At Macro Investor we remain structurally bearish on housing markets. But the increasing policy interventions in the market may have short term effects. At the very least there will be a perception of such. Our view, therefore, is that the best way to play interest rate cuts is to re-examine the long-ignored space of the building materials. The RBA and governments will have little choice but to pursue policies aimed at stimulating new house building as the mining boom recedes and all of those “adjusted” construction workers head back home…
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