I am considering 2 shares to buy before the next Bank of England interest rate cut

Interest rate cuts may affect markets in unexpected ways. To keep my portfolio stable, I think of the best stocks to buy to prepare for volatility

After the US cut interest rates by 50bps last week, all eyes are on the Bank of England (BoE). In August, it made the first rate of the year, at 25bps. Traders and financial institutions expect at least one rate cut this November, to 4.75%, and another four to 3.75% by 2025.

The leading US technical index, i Nasdaqup 1.8% since the Fed's biggest rate cut last week. In comparison, the FTSE Shares Everything down 0.6% since the BoE cut on August 1. So does the UK index need that further drop of 0.25 per cent before recovery begins – or could further rate cuts trigger further declines?

To prepare for any situation, I consider the following two shares.

A defensive dividend stock

Certain stocks tend to weather the storms of volatility better than others. When rocky markets send other stocks tumbling, defensive stocks excel. Utilities and healthcare stocks are typical examples as they maintain strong demand and are not cyclical.

With a strong share price and reliable profit, Severn Trent (LSE: SVT) is a good example. The water and waste company has a yield of 4.5% and has paid dividends consistently for several decades. But it has very little growth potential, with a price-to-earnings (P/E) ratio of 56.4. If earnings do not improve, stocks may lose in the short term.

The company was fined £2m recently for failing to stop sewage spilling into the River Trent. As a result, it now carries £8.15bn in debt, which could threaten dividends if the company can't find a way to cut costs and improve earnings.

Growth has been steady with only spikes and dips, but it is slow. Stocks are up 225% over the past 30 years, which is only 4% a year on average. Not really exciting benefits. But with constant demand for resources, income is fixed and volatility is low. To keep my portfolio stable, I plan to buy stocks this week.

Bring on the holidays

Stability is one thing but if the market is converging, I don't want to miss it completely. Mid-cap stocks tend to have a lot of growth potential and are looking good right now Card Industry (LSE: CARD). A great seller UBS put a buy rating on the stock last week with a target price of 180p, a 25% upside from the current price.

The online card and gift company took a nosedive shortly after going public in 2014, plunging 92% in five years. Not a good start. But things have improved since mid-2020, and the price is up nearly 400% from its all-time low. And with the holiday season coming, online card and gift sales should see a huge increase.

It trades 47% below fair value based on estimates of future cash flows, with earnings forecast to grow 6% annually. It lacks the growth potential of its nearest competitor, Pig of the monthpaid a dividend of 3.2 %. So, I plan to buy shares next month.