Fed rate cuts should favor preferred stocks, Virtus money manager says

Published On Oct 5, 2024, 11:00 AM

The article discusses insights from Jay Hatfield, a fund manager at Virtus InfraCap U.S. Preferred Stock ETF, who predicts that potential Federal Reserve interest rate cuts will benefit preferred stocks. These investments offer more risk than bonds but less than common stocks, making them appealing during periods of economic recovery post-tightening cycles. As of now, the Virtus InfraCap ETF has shown significant returns, with a 10% increase this year and nearly 23% over the past twelve months, drawing attention to top holdings like Regions Financial, SLM Corporation, and Energy Transfer LP, all of which have seen notable stock performance this year.

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Investors are likely to see favorable conditions for preferred stocks, particularly as rate cuts could lead to increased capital flows into these assets. This indicates potential growth for preferred stocks in a low-rate environment. The Virtus InfraCap U.S. Preferred Stock ETF, which has already shown strong performance, may continue to rise as interest rates decrease further.

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Fed rate cuts should favor preferred stocks, Virtus money manager says

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One financial firm is trying to capitalize on preferred stocks – which carry more risks than bonds, but fewer risks than common stocks.

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