As the Federal Reserve gears up for its first interest rate cut, Catalyst Funds co-founder, CIO, and senior portfolio manager David Miller breaks down how investors can best position their portfolios.

Miller notes that bonds (^TYX, ^TNX, ^FVX) and equities (^DJI, ^IXIC, ^GSPC) will likely benefit from the Fed's cutting cycle. "We're playing calendar spreads when it comes to commodities, so we're not betting on the direction of commodity prices, but we're trying to earn the storage costs associated with those," Miller tells Yahoo Finance.

"We're also trying to pick up the differentials between yields in different countries," he continues. He highlights borrowing in Switzerland and Japan as good trades and says that his overall strategy is "to play it as diversified as we can as to where we're picking up our return streams."

He expects the Fed to cut twice this year, with the first cut starting in September. As rates start to ease, he believes that "high-margin monopolistic type businesses that have really strong tailwinds" are poised to benefit. He specifically points to the tech sector and names like Microsoft (MSFT), Alphabet (GOOG, GOOGL), and Nvidia (NVDA) as examples.

In addition, he highlights fintech names like Visa (V) and Mastercard (MA), explaining, "if you combine inflation with more money coming through the system, combined with taking a little cut off the top of every transaction, those are phenomenal businesses as well."

For more expert insight and the latest market action, click here to watch this full episode of Catalysts.

This post was written by Melanie Riehl