5 ways to prepare your portfolio for more rate cuts

financialpost.com:

After much angst over inflation, the weaker economy in this country finally prompted the Bank of Canada to cut its interest rate by 0.25 per cent, but what now? What should investors do next now that a cut is finally official?

Well, first, keep in mind that the rate move was very much widely anticipated. Stocks and the market have a good way of pricing in expectations well ahead of time. Thus, we would certainly not suggest doing anything dramatic to a portfolio since the rate cut is likely already reflected in the valuations of securities.

But investors can still look to potentially tilt their portfolio in certain ways to position themselves for possible longer-term gains, especially if the first rate cut sets off a series of cuts. Let’s look at five strategies to use in the new rate regime.

Dividend stocks got crushed in 2022 when inflation soared and interest rates followed. Then, costs rose and earnings dropped at some stalwart dividend companies such as BCE Inc. and Telus Corp. It got pretty ugly out in dividend land. BCE — the classic widows-and-orphans stock — is down 18 per cent over the past year. Some orphans might be going hungry.

Now, a rate cut won’t help all companies. Those with fundamental problems will still have them. But it should be positive for dividend stocks in general. For example, with high debt levels and high dividends, utilities are particularly sensitive to rates. The S&P/TSX composite index utility sector is still down 0.74 per cent this year, but is up 12.4 per cent off its low, and should be poised to do better as rates drop.

Frankly, we are almost not keeping up with the merger news these days. In the past month or so, Park Lawn Corp., Canadian Western Bank, Cloud MD Software & Services