How Can You Take Advantage of Interest Rate Drops? 2 Popular Money Experts Weigh In

As interest rates begin to drop, many consumers may wonder what this means for their personal finances and investments. To help shed light on these changes, we turn to two seasoned financial experts who frequently share their money views on CNBC—Dan Nathan and Guy Adami, MRKT Call hosts and CNBC contributors. Both of these professionals have decades of experience analyzing market movements and economic trends, and their insights offer valuable guidance on how to navigate a lower interest rate environment.

Let’s dive into some specific ways you can invest when interest rates drop.

Dan Nathan’s take on interest rate drops: What sectors stand to gain?

Dan Nathan, a prominent financial analyst and the founder of RiskReversal Advisors, is a regular contributor to CNBC’s Fast Money and widely respected for his market expertise. With decades of experience in risk management and market analysis, Nathan brings a keen eye to how shifts in economic policy, like interest rate changes, affect various sectors.

Nathan emphasizes the importance of seeing interest rate changes as an investing opportunity.

“First, when it comes to thinking about drops in interest rates through an investing lens, you might consider which sectors or, significantly, stocks benefit from a lower interest rate environment,” says Nathan. “One that investors usually associate with a counter to lower interest rates would be high-paying dividend stocks, which could include Telcos, Utilities, and Consumer Staples.”

Nathan highlights that investors typically focus on sectors that are seen as “counter-cyclical” or defensive during periods of low interest rates. This includes industries that offer high-paying dividend stocks, such as telecommunications, utilities, and consumer staples. These stocks often become more attractive to investors when interest rates fall because they offer stable returns with less risk than other, more volatile options.

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Nathan also recommends the strategy of dollar-cost averaging as a way to navigate times of financial volatility. 

What can consumers do to take advantage of lower interest rates?

Consumers interested in taking advantage of these lower interest rates may want to consider allocating part of their portfolios into dividend-paying stocks from these sectors. Not only can these stocks provide consistent income, but their defensive nature makes them an appealing option when interest rates decline and economic uncertainty looms. Before making any investments, it’s wise to consult with a financial advisor to ensure these choices align with personal financial goals and risk tolerance.

For more insights on other ways to take advantage of lower interest rates, check out our full breakdown here: 5 Ways to Take Advantage of Interest Rate Drops

Guy Adami’s view on the economic sensitivity of small caps and commodities

Guy Adami, a seasoned trader, has appeared as a regular panelist on CNBC’s Fast Money for more than 18 years. Known for his expertise in global markets and his ability to distill complex financial concepts, Adami has spent decades on Wall Street, analyzing trends and providing actionable insights to investors.

Adami provides a different perspective on how interest rate changes can affect various markets. He argues that lower interest rates should be particularly supportive of small-cap stocks. These stocks represent smaller, more nimble companies that often perform well when the economy shows signs of growth. As borrowing costs decline and capital becomes more accessible, small-cap companies—especially those in sectors like technology and healthcare—tend to thrive.

Adami also suggests that a drop in interest rates could weaken the U.S. dollar, which has the potential to benefit commodities. As the dollar depreciates, commodities like gold, oil, and agricultural products often see price increases, making them an attractive option for investors looking to hedge against currency risk or inflation.

“In theory, lower rates should be very supportive of the most economically sensitive names, which are the small caps,” says Adami. “In addition, lower rates could create weaknesses in the U.S. dollar, which should benefit commodities.”

How can consumers capitalize on small-cap growth?

For consumers who are looking to capitalize on small-cap growth, Adami recommends focusing on smaller, economically sensitive stocks that stand to benefit from an economic recovery spurred by lower interest rates. Additionally, investors who are concerned about a potential weakening of the dollar might consider diversifying their portfolios with commodities or commodity-focused ETFs. This could help protect against currency risk while also taking advantage of potential price increases in key markets.

The Bottom Line: Keep Dividend-Paying Stocks and Small-Cap Stocks in Mind 

Both Nathan and Adami offer valuable insights into the potential impacts of falling interest rates. While Nathan advises focusing on dividend-paying stocks in sectors like telecommunications, utilities, and consumer staples, Adami suggests that small-cap stocks and commodities might present opportunities in a lower-rate environment.

For consumers, the key to taking advantage of these changes is understanding how interest rate movements can influence various parts of the market. Whether it’s through income-generating investments or more growth-oriented options, aligning your financial strategy with these shifts can help you make the most of the current economic climate.

Before making any significant changes to your investment strategy, it’s always a good idea to consult with a financial advisor who can help tailor these insights to your personal goals and risk tolerance.