Positioning for Growth in the New Low-Rate Era: Strategic Sectors and ETFs to Watch

The Federal Reserve's potential rate cut in September 2025 has markets on edge. While the economy remains resilient—nominal GDP growth above 5%, unemployment at 4.2%, and retail sales defying expectations—the Fed faces a delicate balancing act. Inflation, though moderating, still clings stubbornly to 3.1% (core CPI) and 3.7% (core PPI), while consumer expectations for future inflation have spiked to 4.9%. This tension between a strong labor market and persistent inflation has left the Fed in a 50-50 quandary. But if history teaches us anything, it's that a rate cut, even a modest one, can unlock new opportunities for investors. Here's how to position your portfolio for the next chapter.

The Sectors Poised to Win in a Low-Rate Environment

When rates fall, capital becomes cheaper, and certain sectors thrive. Let's break down the winners:

1. Communication Services: AT&T (T) – A Dividend Powerhouse

AT&T, with its $150 billion debt load, is a prime beneficiary of lower borrowing costs. The telecom giant has already slashed debt from $170 billion in 2021 through restructuring and the spinoff of WarnerMedia. A rate cut would further ease its financial burden, allowing it to maintain its 3.8% dividend yield while investing in 5G infrastructure.

2. Financials: First Horizon (FHN) – Lending in a Low-Cost World

Regional banks like First Horizon ($4.8 billion debt, $80 billion in assets) stand to gain as demand for business and consumer loans surges. Lower rates make borrowing cheaper for small businesses and households, directly boosting FHN's profitability. The stock has already outperformed the S&P 500 in the past year, and a rate cut could accelerate this trend.

3. Consumer Discretionary: Ford Motor (F) – Revving Up Auto Sales

Ford's $160.2 billion debt load and 3.556 debt-to-equity ratio make it highly sensitive to interest rate shifts. A rate cut would reduce borrowing costs, freeing up capital for innovation in electric vehicles and boosting consumer demand for auto loans. The F-150's popularity could see a surge if financing becomes more accessible.

4. Utilities: NextEra Energy (NEE) – Powering Through Cheap Capital

NextEra Energy, a leader in renewable energy, requires massive capital for wind and solar projects. With $93.2 billion in debt, lower rates reduce financing costs for its $6 million customer base. As the world pivots to clean energy, NEE's ability to fund infrastructure at lower costs positions it for long-term dominance.

5. Real Estate: Prologis (PLD) – Warehousing the Future

Prologis, a REIT with $35.3 billion in debt and 1.3 billion square feet of industrial space, benefits from reduced borrowing costs in a low-rate environment. High demand for warehouse space, especially in e-commerce hubs, means a rate cut could drive construction and expansion, boosting dividends (currently 3.7%).

ETFs to Capitalize on the Rate-Cut Rally

For investors seeking diversified exposure, these ETFs align with the new low-rate era:

1. iShares Total Return Active ETF (BRTR)

Managed by Rick Rieder, BRTR combines investment-grade bonds with high-yield and emerging markets debt. As rates fall, bond prices rise, and BRTR's active management can exploit relative value across sectors.

2. Avantis US Small Cap Value ETF (AVUV)

Small-cap value stocks historically outperform in rate-cut cycles. AVUV targets undervalued small-cap companies, which gain from cheaper financing and improved access to capital.

3. iShares Advantage Large Cap Income ETF (BALI)

BALI offers a 7.0%–7.5% target yield through a mix of dividend stocks, covered calls, and futures. As borrowing costs drop, corporate profits and reinvestment opportunities rise, supporting income-focused investors.

The Bottom Line: Act Now, Adapt Later

The Fed's September decision will hinge on September 11's inflation data and the July jobs report. If a 25-basis-point cut materializes, the sectors and ETFs above will likely outperform. However, don't wait for the Fed to act—position your portfolio now.

Key Takeaway: A rate cut isn't just a policy shift; it's a catalyst for growth. Whether you're buying AT&T for dividends, Ford for innovation, or BRTR for active bond exposure, the new low-rate era demands bold, strategic moves.

Final Call to Action: Diversify across sectors, prioritize rate-sensitive ETFs, and stay agile. The Fed's pivot could be the start of a bull market—don't miss your chance to ride the wave.