Don't Pick a Fight With the Fed, Unless You're Willing to Win: 3 Ways to Benefit From More Rate Cuts in 2026

"Top of mind for most investors may be overall economic growth, and that of AI. Indeed, the AI trade is driving most of the GDP growth we've seen in recent quarters, and that's a trend that's expectid to continue. And with most of the economic growth still coming from the top 10% of wage earners, the likelihood that we see the so-called "K-shaped" economy gather steam, this could become much more important to the overall investing narrative in 2026."

"For those who think (as I do) that interest rates could come down faster than many economists think next year, here are three ways to benefit from this trade playing out. Bonds Investors who have plenty of capital gains on their books, and may be looking to reallocate some of these gains toward other asset classes which may provide some portfolio protection (in the case that future rate cuts come alongside recessionary headwinds), bonds are a great place to hide out."

AI-driven investment activity has been a primary contributor to recent GDP growth, with gains concentrated among the top 10% of wage earners, increasing the risk of a K-shaped economy. Interest rates and the pace of rate declines in 2026 will be pivotal for markets. Faster-than-expected rate cuts would benefit rate-sensitive assets. Bonds offer portfolio protection and capital appreciation when rates fall. Bond ETFs and funds reduce idiosyncratic risk compared with individual bonds. Bonds are inversely correlated with rates, and a diversified duration portfolio—particularly Treasurys—can deliver outsized returns in down or sideways markets.

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