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Home » Fed rate cuts should favor preferred stocks, Virtus fund manager says

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

The Federal Reserve’s recent interest rate cuts have been a hot topic of discussion among investors and analysts alike. While some believe that lower rates could be a boon for stocks in general, others are pointing to a specific type of investment that could benefit the most from the rate cuts – preferred stocks.

Preferred stocks are a unique type of investment that sits somewhere between common stocks and bonds. They offer investors a fixed dividend payment, similar to a bond, but also have the potential for capital appreciation, like a stock. This combination of fixed income and equity-like returns makes preferred stocks an attractive option for many investors, especially in a low interest rate environment.

One fund manager who is particularly bullish on preferred stocks in the current market climate is Joe Wysocki of Virtus Investment Partners. Wysocki believes that the recent rate cuts by the Federal Reserve should favor preferred stocks over other types of investments.

In a recent interview, Wysocki explained that preferred stocks tend to perform well in a falling interest rate environment because their fixed dividend payments become relatively more attractive compared to other income-generating investments. Additionally, preferred stocks are often issued by companies with strong balance sheets and stable cash flows, which can provide a level of safety and stability that is appealing to investors in uncertain times.

Wysocki also pointed out that preferred stocks have historically outperformed common stocks during periods of economic uncertainty or market volatility. This is because preferred stocks are higher in the capital structure than common stocks, meaning that in the event of a company’s bankruptcy or liquidation, preferred stockholders have a higher claim on the company’s assets.

Overall, Wysocki believes that preferred stocks are a compelling investment option for investors looking to generate income and preserve capital in the current market environment. With the Federal Reserve’s recent rate cuts likely to continue supporting the performance of preferred stocks, now may be a good time for investors to consider adding them to their portfolios.