It was a great month for the US stock market, mainly due to easy monetary policy. Since the club’s last monthly meeting, investors have been celebrating the Federal Reserve’s transition to an era of lower interest rates. On September 18th, the US central bank announced the first interest rate cut in more than four years, sending stock indexes to record highs. Most recently, the S&P 500 and Dow Jones Industrial Average both closed at record levels on Monday. Since their monthly meeting on September 12th, the S&P and Dow are up 4.5% and 4%, respectively. We took advantage of the high prices in the market. News of the rate cut sent shares of Meta Platforms, Alphabet and Danaher higher, prompting them to sell their shares on September 26th in an overbought market. The club also withdrew from Procter & Gamble on October 8th. The rationale is that there is less need to hold traditional defensive stocks like consumer staples while the Fed embarks on an easing cycle. We retained interest rate-sensitive stocks like Wells Fargo and Morgan Stanley, which have been among the best performing stocks since our last monthly meeting. (I sold a few on the latter, details below). The improvement in the macro environment backed by policy easing bodes well for the meta-platform as well. Meanwhile, Salesforce and Eaton’s stock prices rose, moving them into the top five due to continued investments focused on generative artificial intelligence. Here’s a breakdown of the factors that drove the rally in each of these five club stocks from after the market close at the September meeting to the close of trading on Tuesday ahead of the October monthly meeting at noon ET on Wednesday. 1. Wells Fargo: 22% This stock rose after the Fed cut interest rates for the first time in mid-September, sending the entire financial sector higher. Wells Fargo benefits from lower borrowing costs, which stabilize its interest-based revenue stream. The company’s net interest income (NII) took a hit as customers sought to park their cash in higher-yielding alternatives amid a prolonged high interest rate environment. Increased bank lending also weighed on the economy. Wells Fargo’s strong quarterly earnings report on Oct. 11 and positive comments from Wall Street in the subsequent session pushed the stock to a multi-year high. Taking earnings into consideration, we raised our price target from $61 to $66 and reiterated our rating on the stock as “1”, equivalent to “buy.” 2. Morgan Stanley: 16.2% Stocks rose after the Fed’s decision as investors became more optimistic about a soft landing for the US economy. Morgan Stanley benefits from lower interest rates and, in turn, an improving economy because it can facilitate Wall Street deals such as initial public offerings and mergers and acquisitions. This is great news for the turnaround story of Morgan Stanley’s important investment banking division. Indeed, I sold a small amount of financial stocks on September 19th due to the post-Fed stock rally. That’s because the club is discussing a complete exit from Morgan Stanley in favor of a possible better recovery strategy for investment banking units like Goldman Sachs. But expect Morgan Stanley’s place in the portfolio to become clearer when it reports its quarterly results on Wednesday. 3. Salesforce: 13.8% What accounts for this tech stock’s double-digit gain? Two words: artificial intelligence. Salesforce held its Dreamforce conference last month, where CEO Marc Benioff promoted Agentforce, the company’s AI-powered chatbot tool. On September 19, the company’s stock rose 5.4%, its biggest single-day increase in nearly four months, after management provided more details about its core products. Wall Street also received positive comments one after another, further expanding the momentum. Piper Sandler upgraded the company’s stock rating from neutral to buy on September 24th. A week later, Northland Capital Markets also upgraded the software maker from a hold rating to a buy-equivalent rating. 4. Meta Platform: 11.5% The social media giant gains after investors saw the company’s latest VR headset, the Quest 3S, announced at the social media giant’s annual developer conference on September 25 There was a trend. Stock prices continued to trend upward. UBS raised its price target to $690 per share from $635 as the company’s advertising business showed signs of slowing. Guggenheim raised its price target to $665 from $600. Citing recent channel checks, the company’s analysts asserted that meta is the biggest destination for increased ad spend. 5. Eaton: 11.3% This industry name does not have a single catalyst for its superior performance. However, increased investment in data centers on the back of increased adoption of AI and positive research on Wall Street likely contributed to the stock’s rise. On September 16, Citigroup began reporting Eaton as a buy, and the stock price rose. Analysts argued that Eaton will continue to benefit from construction of data center facilities, which in turn will increase demand for its power management solutions. Morgan Stanley reiterated its buy rating on Eaton on October 10, asserting that it is preparing positively for earnings season. In the same session, JPMorgan analysts maintained a Buy rating on Eaton stock and raised their price target from $325 to $349 per share. Shares traded near all-time highs on Tuesday. (See here for a complete list of Jim Cramer Charitable Trust stocks.) As a subscriber to Jim Cramer’s CNBC Investment Club, you will receive trade alerts before Jim makes a trade. After Jim sends a trade alert, he waits 45 minutes before buying or selling stocks in his charitable trust’s portfolio. If Jim talks about a stock on CNBC TV, he will issue a trade alert and then wait 72 hours before executing the trade. 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It was a great month for the US stock market, mainly due to easy monetary policy.
