As the Federal Reserve prepares for its first rate cut, David Miller, co-founder, CIO and senior portfolio manager of Catalyst Funds, explains how investors can best position their portfolios.

Miller notes that bonds (^TYX, ^TNX, ^FVX) and stocks (^DJI, ^IXIC, ^GSPC) are likely to benefit from the Fed’s rate-cutting cycle. “In commodities, we’re betting on calendar spreads, so we’re not betting on the direction of commodity prices, but we’re trying to earn the associated storage costs,” Miller tells Yahoo Finance.

“We also try to smooth out the differences between yields in different countries,” he continues. He highlights loans in Switzerland and Japan as good deals and says his overall strategy is to “be as diversified as possible to get our return streams.”

He expects the Fed to cut rates twice this year, with the first cut starting in September. He believes that “high-margin monopolistic companies that have really strong tailwinds” will benefit from the rate cut. He cites the technology sector in particular and names like Microsoft (MSFT), Alphabet (GOOG, GOOGL) and Nvidia (NVDA) as examples.

He also highlights fintech names like Visa (V) and Mastercard (MA), explaining, “When you combine inflation with more money flowing through the system with the fact that you take a small percentage of every transaction, those are also phenomenal companies.”

Click here to watch the full episode of Catalysts for more expert insights and the latest on market developments.

This article was written by Melanie Riehl