Josh Brown breaks down which stocks work best in a rate-cutting environment

Josh Brown, CEO of Ritholtz Wealth Management, broke down how investors should position with the Federal Reserve on the verge of cutting rates. He highlighted a barbell strategy, recommending both large-cap tech and other sectors like healthcare and financials.

"I think it's barbell. I don't think you want your entire portfolio to be invested on the premise that the raging spending growth in capex around the AI theme will just continue on indefinitely," Brown said in the latest CNBC Pro Talks installment with Scott Wapner on the sidelines of Future Proof Festival in Huntington Beach, CA.

(Check out Josh Brown's Best Stocks for CNBC PRO here.)

The longtime investor said other investing themes that have started to work include healthcare stocks, housing-related names as well as financials, which should all benefit from lower interest rates.

"There are just a lot of areas where people are making money and so you want to be in large cap tech, you sort of have to be. You're extremely dominant, not only as a proportion of the S&P but their earnings growth is a big part of the overall market to earnings growth, but you don't have to do that exclusively," he said.

Brown said rate cuts are beneficial as long as the labor market remains stable because lower borrowing costs bring relief to consumers and borrowers. He believes that the current market environment is more balanced compared to the tight labor market of 2023-2024.

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