BY MURRAY COLEMAN, (Investor's Business Daily)

Nobody knows how long it'll take for interest rates to fall.

But a new study by Standard & Poor's has some advisers planning ahead. They're looking at exchange traded funds that might prosper if the Fed decides to lower short-term rates.

"The interim period while we're not raising or lowering rates is a time to build ETF watch lists," said John Kvale, a Dallas-based adviser. "If it's a soft landing for the economy, then our belief is that we'll gravitate much more toward higher-quality stock funds."

He's moving clients away from small-cap ETFs. The funds he favors now include S&P 500 tracker SPDRs. (SPY) "We're holding off right now on investing in more sector-specific ETFs," Kvale said.

If past trends hold, investors should start seeing rates drop in seven months. At least that's the finding of S&P, which looked at eight rate plateaus since 1974.

It's A Breather

Of course, the hard part is telling whether the Fed's pause in August will turn out to be a lengthy breather. Many advisers aren't making major moves until they get a clear picture.

"Our view is that we're farther away from the point when rates are lowered," said Bruce Zaro, chief technical strategist at Delta Global Advisors. "Barring some dour unanticipated events, we're probably closer to a year away."

Whatever the timing, he sees the S&P study as a wake-up call to prepare watch lists. "At the very least, top performers are shifting," Zaro said. "We're using this period to prepare our strategies and do more research."

Defensive Sectors

During a plateau, S&P found that outperforming sectors tend to be consumer staples, financial services, health care, telecom and utilities. "During periods of uncertainty like this, investors tend to park their money in more defensive industries," Zaro said.

He's sticking with iShares Dow Jones U.S. Utilities (IDU) for now. Delta Global started buying it for high net-worth investors in January at 77.25. The ETF is now trading above 83.

"It really was marking time until the Fed appeared to be ready to stop its cycle of 17-consecutive rate hikes in late June," Zaro said. "Then it moved up almost 12%. For the past month it has been consolidating those gains."

He has a price target of 99.50. "After this consolidation is complete, we're looking for a breakout around 85.50," Zaro said. "If that happens, we'll buy more. Right now, we own just an average position in that ETF."

Once rate cuts seem more apparent, he's likely to put much more into iShares Goldman Sachs Software Index. (IGV) "This is an area of the market with high volatility," Zaro said. "When the market's moving up, that's the type of fund you want to own."