Top Stocks to Own When Interest Rates Rise

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Introduction

When interest rates rise, it can have a significant impact on the stock market. Companies in certain sectors may be more affected than others, making it important for investors to identify the best stocks to own during these times. In this article, we will discuss some of the top stocks that tend to perform well when interest rates rise.

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1. Financial Institutions

Financial institutions, such as banks and insurance companies, tend to benefit from rising interest rates. Higher interest rates allow banks to increase the rates they charge on loans, leading to higher profit margins. Insurance companies also benefit from higher interest rates as it allows them to earn more income from their investment portfolios. Examples of stocks in this sector include JPMorgan Chase, Bank of America, and Goldman Sachs.

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2. Real Estate Investment Trusts (REITs)

3. Energy Stocks

Energy stocks, particularly those in the oil and gas sector, tend to perform well when interest rates rise. This is because higher interest rates often coincide with periods of economic growth, which in turn leads to increased demand for energy. Additionally, rising interest rates can strengthen the value of the US dollar, making commodities such as oil more expensive for other countries and boosting energy companies’ profits. Stocks in this sector include Exxon Mobil, Chevron, and Schlumberger.

4. Consumer Discretionary Stocks

Consumer discretionary stocks refer to companies that sell non-essential goods and services, such as retail, entertainment, and travel companies. When interest rates rise, it indicates a strong economy and increasing consumer spending power. This can benefit consumer discretionary stocks as people have more disposable income to spend on non-essential items. Examples of stocks in this sector include Amazon, Home Depot, and Walt Disney.

5. Industrial Stocks

Industrial stocks are companies involved in manufacturing and producing goods and services used in construction, production, and transportation. These stocks tend to do well during periods of economic expansion, which often aligns with rising interest rates. As the economy strengthens, businesses invest in new equipment and technologies, driving demand for industrial products. Some notable industrial stocks include Boeing, Caterpillar, and General Electric.

6. Technology Stocks

Technology stocks have been some of the best performers in recent years and tend to fare well regardless of interest rate changes. However, during periods of rising interest rates, the technology sector can still be a good place to invest. This is because technology companies often have strong balance sheets and high growth potential, which can continue to attract investors. Examples of technology stocks include Apple, Microsoft, and Alphabet (Google).

7. Infrastructure Stocks

As interest rates rise, governments often invest in infrastructure projects to stimulate economic growth. This can benefit companies involved in construction, engineering, and building materials. Infrastructure stocks can include companies involved in road and bridge construction, utilities, and transportation. Notable infrastructure stocks include Jacobs Engineering Group, AECOM, and Vulcan Materials.

8. Healthcare Stocks

Healthcare stocks tend to be less affected by interest rate changes compared to other sectors. However, during periods of rising interest rates, certain healthcare stocks can still perform well. Companies that provide essential healthcare services and products, such as pharmaceuticals, medical devices, and healthcare providers, can be good investments. Examples of healthcare stocks include Johnson