Interest Rate Cuts as a Catalyst for Growth Stocks: Two Stocks to Buy and Hold

Interest rate cuts are often seen as positive for stocks. On one hand, lower interest rates make it easier for companies to borrow, thereby promoting business growth. On the other hand, fixed-income securities become less attractive compared to stocks, prompting many investors to invest in stocks and drive their prices up. The connection between interest rates and the stock market is complex; however, stocks could benefit from the recent aggressive rate cut by the U.S. Federal Reserve. Growth stocks, which thrived in the 2010s under historically low interest rates, could benefit once again. Two stocks to consider are Shopify and Adyen. Shopify, which went public in 2015, was a market favorite by the end of the last decade. At the start of the pandemic, the company benefited from the retail shift to online channels. However, since early 2021, Shopify has struggled. The company divested its logistics business, which was costly and low-margin, yet managed to report a 21% increase in revenue for the second quarter. This development demonstrates how Shopify is optimizing its business model to remain competitive in the long term. Adyen, a Netherlands-based fintech specialist, also benefits from growth in e-commerce, as digital payment methods are essential for online trade. The company offers a wide range of payment solutions and is particularly valuable for multinational corporations. Although Adyen's revenue growth has slightly slowed, it remains consistent. In the first half of the year, revenue rose by 23.6%, and the processed transaction volume increased by 45%. Adyen has strategically invested in its growth, which initially impacted margins, but these have since recovered. Earnings per share increased by 45% to 13.15 euros, with North America standing out as a rapidly growing market region. Overall, both Shopify and Adyen can emerge as leading companies in rapidly growing markets. Their strong business models and competitive advantages make their stocks a worthwhile investment.