Motley Fool Money

Episode: When Rates Move, Who Wins?
Date: August 26, 2025
Host: Emily Flippen
Guests: Jason Hall & David Meyer

Overview

This episode dives into which sectors and companies stand to benefit the most when interest rates start to fall, following signals from Federal Reserve Chair Jerome Powell about possible rate cuts this year. The discussion centers on real estate, financials, bond proxy stocks, and offers a broader perspective on how investors should interpret rate-driven opportunities—emphasizing quality over chasing trends.

Key Discussion Points & Insights

1. Real Estate & Homebuilders

Starts at 00:00

• Interest Rates & Housing Demand:
  Lower rates typically benefit homebuilders by making mortgages cheaper and spurring buyer demand.

  • David Meyer: “Lower interest rates help home builders in so many different ways. First, … they make it easier for potential buyers and that defects demand.” (01:05)

• Profitability and Incentives:
  As rates fall, homebuilders might cut back on incentives and see higher profits per house.

• Debt Costs for Builders:

  • Jason Hall: “They're also big consumers of debt … They buy land they hold for multiple years and finance that land because they just don't have a bunch of cash laying around.” (01:55)

• Affordability Constraints:
  Emily counters that even with lower rates, affordability remains a challenge, leaving many buyers priced out.

  • Emily Flippen: “It's possible that we still have people, even with lower interest rates, that are priced out of the home market entirely.” (02:09)

• Rent vs. Homeownership:
  The panel notes that rent (housing services) makes up a major part of CPI and can be indirectly impacted by rates through financing costs and supply-side investments.

  • Jason Hall: “Interest rates actually do affect rents and in a bigger way than we realize, because the vast majority of commercial real estate is financed.” (03:25)

• Investment Ideas:

  • Rocket Companies (RKT): A potential beneficiary of lower rates due to its mortgage business and recent Redfin acquisition.
  • Green Brick Homes (GRBK): Highlighted as a homebuilder poised to benefit from multi-year lower rate trends, especially in key growth geographies.
  • Realty Income (O): A REIT with access to lower capital costs, benefiting from cheaper debt refinancing.

• Quality Over Hype:

  • Jason Hall: “Focusing on quality still matters—maybe even more in this environment—because that's where you get the sustained benefits…” (07:21)

2. Financials: Banks, Insurers, Fintech

Starts at 08:48

• Interest Margins & Volume:
  Lower rates can compress net interest margins for banks, but the increase in loan volume can outweigh this.

  • Jason Hall: “If you can earn an extra $25 million in margin at a lower gross margin rate, you take the extra $25 million.” (09:16)

• Lag in Rate Adjustments:

  • David Meyer: “The rates that they charge for their loans may not fall as quickly as the rates that they get for the money they borrow...” (10:34)

• Fintech Impact:
  Lower rates can help payments and lending fintechs (PayPal, Block, Affirm) by boosting consumer borrowing and spending, though overall economic weakness remains a headwind.

  • David Meyer: “In the short term, [a rate cut] should be beneficial to much of the fintech sector via a bump in demand.” (11:33)

3. Bond Proxy Stocks: Utilities, Dividends, and High Yield

Starts at 13:33

• Dividend Stocks vs. Treasuries:
  Rising rates have previously made dividend stocks less attractive compared to risk-free government yields, leading to underperformance.

  • Emily Flippen: “Dividend stocks lose luster … 3% dividend yield sounds great until you’re comparing it to a risk free 5%.” (13:33)

• Rate Cuts & Relative Attractiveness:

  • David Meyer: “It’s a little weird, but I think the rate cut could make them a little bit more attractive … those stocks could actually get a little bit of capital appreciation.” (14:17)

• Decline in Dividend Stocks:

  • Jason Hall: “The number of dividend paying companies in the US markets has fallen substantially ... all this money flowed into VC that would have been in bonds or other income investments." (15:58)

• Generational Shift in Investing:

  • Emily Flippen: “If I have dividend paying stocks in my portfolio, it’s by sheer accident, not through any sort of conscious capital allocation…” (18:37)

4. Lightning Round: Overlooked Interest Rate Winners & Risks

Starts at 19:21

• Companies With Client Cash (Float):

  • Example: Airbnb generates significant profits from interest earned on client cash.
    • Emily Flippen: "Over the course of 2024, the interest income from client cash generated around 30% of their total profits for the year. And that’s unrelated to their core platform offering.” (19:21)

• Small Caps:

  • David Meyer: Lower rates are especially helpful for small companies that need cheaper capital to grow. “All things being equal, I would definitely look within the small cap sector for opportunities when, when rates are falling.” (20:42)

• Automakers – A Cyclical Caution:

  • Jason Hall: “Even a great company in a mediocre industry is still a mediocre company.... Investments, any benefit investors see from falling rates in that industry ... let me paraphrase Jerome Powell and say it’s probably going to be transitory.” (21:19)

Notable Quotes & Memorable Moments

• On Quality Investing:
  “Focusing on quality still matters—maybe even more in this environment—because that's where you get sustained benefits ... not just a little bit of bump because you’re chasing what you read on Wall Street Bets.”
  — Jason Hall (07:21)

• On Short-Term Rate Chasing:
  "The thesis for our company and an investment should be so much bigger than just what is the current interest rate regime or where do I see the interest rate regime going?"
  — Emily Flippen (07:39)

• On Generational Investing Shifts:
  “We have an entire generation of retail investors who made their money on stocks and saw bonds as this not worth it thing to invest in.”
  — Jason Hall (17:49)

• On Hidden Risks:
  “Airbnb has float. Who would have thought it?”
  — Jason Hall & Emily Flippen exchange (20:36)

• Automaker Reality Check:
  “Besides Tesla, find me a massively market beating successful investment in the automaker space. You really can't ... Any benefit investors see from falling rates in that industry ... is probably going to be transitory.”
  — Jason Hall (21:19)

Timestamps for Key Segments

• Real Estate & Homebuilders: 00:00 – 08:07
• Financials (Banks, Insurers, Fintech): 08:48 – 12:53
• Bond Proxy Stocks/Dividend Players: 13:33 – 19:21
• Lightning Round (Miscellaneous Winners/Risks): 19:21 – 22:42

Episode Tone & Takeaways

The tone is conversational, skeptical of easy “rate beneficiaries,” and heavily focused on long-term fundamentals rather than short-term macro shifts. The analysts consistently advocate for quality businesses and warn against chasing fleeting rate-driven trends. They unpack the complex, interconnected ways interest rates filter through the economic and investing landscape—reminding listeners that for many sectors, the effects are nuanced and sometimes transitory.

Bottom Line:
Lower interest rates only tell part of the investing story. Focus on the quality and core business strengths of your investments—don’t let macro cycles overshadow the fundamentals. Some businesses may see visible, short-term benefits, but sustainable winners are those with strong, adaptable models, regardless of where rates stand.