Fed rates not only set short-term borrowing costs for banks, but they also help determine mortgage, auto loan and credit card rates.
According to the firm, shares of a few major discount retailers should outperform if middle-income consumers see higher levels of disposable income.
Shares of Home Depot and Lowe's are up roughly 12.9% and 17.2% this year, respectively, as the prospect of lower interest rates boosts consumer sentiment.
Tech products seller Best Buy could also get a boost from improved middle-income consumer sentiment, Telsey forecasts.
If the rate-cutting cycle boosts sentiment among higher-end consumers, Telsey expects consumer retail names such as Williams-Sonoma and German sandal company Birkenstock to outperform.
Persons:
Dana Telsey, Telsey
Organizations:
Federal Reserve, Fed, Walmart, Dollar, Holdings, Tech, Williams, LSEG
Locations:
U.S, Sonoma, German