Rate cuts and what they mean for everyday investors

Interest rate cuts and what they mean for everyday investors is the focus of The Money Show's Investment School this week.

The US Federal Reserve's announcement of a 50 basis point cut on Wednesday night was followed on Thursday by the SA Reserve Bank's decision to cut rates by 25 basis points.

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'Reserve Bank's 25 bp interest rate cut opens up idea of 50 bp next'

US Fed cuts rates by 50 basis points. Now, it's South Africa's turn...

Stephen Grootes gets some insight from Rand Swiss pundits, Gary Booysen and Kyle Furlong.

Booysen notes that the US Fed's 50 bp cut came as a surprise, because the expectation had been for 25 bps.

The most liquid markets move the quickest and move first, he says.

"As we had the surprise 50 basis point rate cut last night from the Fed, immediately you saw a huge spike in gold, because the 'professionals' were expecting 25 basis points."

"That shock immediately saw asset prices react; gold up immediately... the dollar weakening because suddenly your dollar deposits are getting less interest than was thought they'd get..."

Gary Booysen, Director - Rand Swiss

Booysen highlights the benefits for tech stocks and the real estate sector, along with retail.

"We can see what's happening on the market today - it's all about the technology and we've got the likes of Nvidia up over 5%... Real estate is another sector that's a big beneficiary, and retail is also likely to do very, very well."

Gary Booysen, Director - Rand Swiss

Predicting the future is difficult, Furlong remarks, so you have to consider where best to allocate your capital.

What about sticking to cash?

"What we've seen typically with clients is they say, the bank is offering me 8-9% return. One thing you must know is that's a gross return, the unfortunate part is that you don't always get that as a net amount."

"When you factor in where to allocate your capital in the next 12 months, let's say, you can definitely get that sort of headline return if you put it in the bank, but what's very important to know is where's your tax rate, and how will that impact the return you're getting."

Kyle Furlong, Wealth Advisor - Rand Swiss

A lot to consider, and if you're no expert, expert advice is very well what you need.

Hear more from the Swiss Rand pundits in the interview audio at the top of the article