Virtus Money Manager Predicts Rate Cuts Will Boost Preferred Stocks
Jay Hatfield, CEO of Infrastructure Capital Advisors, expects preferred stocks to benefit from anticipated Federal Reserve rate cuts. His Virtus InfraCap U.S. Preferred Stock ETF, which focuses on high-yield bonds and undervalued companies, has performed well in 2024, with significant gains in key holdings. Hatfield believes preferred stocks are a good investment during periods of stock market growth and monetary easing.
Virtus Money Manager Predicts Rate Cuts Will Boost Preferred Stocks
Jay Hatfield, Founder and CEO of Infrastructure Capital Advisors, believes that preferred stocks, which offer higher yields than bonds but carry less risk than common stocks, are well-positioned to benefit from upcoming Federal Reserve interest rate cuts. Hatfield, who manages the Virtus InfraCap U.S. Preferred Stock ETF (PFFA), sees these investments as a smart play during periods of stock market growth and easing monetary policy.
During a recent interview on CNBC’s “ETF Edge,” Hatfield explained that preferred stocks and high-yield bonds tend to outperform other fixed-income assets when the economy is emerging from a tightening cycle, such as the one the U.S. is currently experiencing. He noted that his ETF has gained 10% so far in 2024 and nearly 23% over the past year, thanks in part to the strength of its top holdings.
As of September 30, 2024, the fund’s top three holdings are Regions Financial, SLM Corporation, and Energy Transfer LP, all of which have surged over 18% this year. Hatfield’s strategy focuses on selecting companies he considers undervalued based on their risk and yield profiles. "Most of the top holdings are in asset-intensive businesses," he added.
Although the Virtus InfraCap U.S. Preferred Stock ETF has seen positive returns in the short term, the fund has experienced a 9% decline since its inception in May 2018.
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