Which stocks are set to benefit from falling interest rates? It depends, according to Citi. Investors are jockeying to get ahead of this week’s Federal Reserve meeting, at which the central bank is universally expected to lower rates for the first time since December. Markets are pricing in a quarter-percentage-point cut at the conclusion of the Sept. 16-17 meeting, with a small possibility of a jumbo cut. There are four more cuts expected to come through March of next year. Yet, how investors should position for a lower interest rate environment hinges on what happens next with the economy, according to Citi strategist Scott Chronert. While lower interest rates are beneficial to a range of companies — such as growth-oriented businesses in tech and small caps, or for capital-intensive businesses such as in financials and utilities — an aggressive rate-lowering campaign historically coincides with a weaker economy that could hurt those same stocks. “A frequent topic in recent client conversations relates to ‘who benefits?’. We see the answer as conditional,” Chronert wrote Friday. “Lower fed funds, and its effect on other front-end rates, need to be considered relative to a steeper rates curve and the underlying economic condition.” Chronert considered the potential stock implications for a drop in the 2-year Treasury yield by a half percentage point, a steepening yield curve and the potential for either positive or negative economic data. The strategist expects that a slowing, but “persistently positive” economic outlook will be beneficial to growth stocks, as well as small- and mid-cap names. However, a deterioration in economic conditions will mean investors should add to traditional defensives and low-beta stocks, which are less volatile than the broader market. Indeed, companies most sensitive to falling rates have seen two-year compound annual earnings growth of 14.2% when the yield curve steepens accompanied by positive economic data, Citi found. On the other hand, a steeper yield curve together with negative economic data will mean the stocks most sensitive to falling interest rates will post growth of just 6.9%, while the least sensitive stocks can gain 18.3%. “The takeaway here is that the data underscores our view that the underlying economic condition will matter as to how markets respond to a next wave of Fed rate cuts,” Chronert wrote. “The better the economic backdrop, the more attractive cyclicality and/or longer-duration risk assets become.” Here are seven names most sensitive to falling interest rates. Gap shares are among the most sensitive to falling interest rates. The stock has underperformed this year, slightly lower in 2025, but has rallied more than 8% this quarter. In August, Gap warned that tariffs will affect its profits going forward. More recently, the apparel retailer said it is expanding into beauty , an announcement that was met positively by investors. Telecommunications stock EchoStar is among the most interest-rate sensitive. It has surged more than 200% this year, and more than 150% just this quarter, as enthusiasm for the name reached a fever pitch. Recently, the stock surged after EchoStar agreed to sell spectrum licenses to SpaceX for about $17 billion. Deutsche Bank Research raised its price target to $102 following the news.
