As all eyes are on the Federal Reserve, Keith Buchanan, GLOBALT Investments senior portfolio manager, joins Wealth! to discuss how investors can best position their portfolios for the interest rate easing cycle ahead.

Buchanan notes that investors are split between a 25- or 50-basis point cut, and the uncertainty around the Fed's next moves are causing "some mixed reactions" in the market. He explains that if the Fed moves forward with a 50-basis-point cut, banks and consumer names like Walmart (WMT) will likely benefit from a soft economy and a dramatic reduction in rates. Meanwhile, sectors more levered to economic growth, like industrials, will most likely come under pressure.

He adds that over the next six to eight months, the market will likely have to reassess the 250 basis points of cuts it has priced in over the next year. With more economic data and Fed speak clarifying the economic outlook for rate cuts, Buchanan believes that "the market expectations of what's happening and what should happen over the coming 12 months with rates doesn't really match up with the market expectations for what the economy could continue to do over the next 12 months."

As the Fed eases rates, Buchanan encourages investors to pull back from large-cap stocks, especially those that are AI-driven. He also stresses the importance of being cautious in the months ahead as the interest rate cuts and the election could cause some volatility. Therefore, investors should ensure they have "plenty of flexibility to attack any opportunities as they present themselves."

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

This post was written by Melanie Riehl