Stocks to buy when interest rates rise
Are you a person who invests in the stock market based on macroeconomic factors? One of the critical factors which should tend to change the investing strategy or stocks you want to buy is the changing interest rates.
The Feds change the interest rate in a bid to control inflation and other aspects of the economy, but as an investor in the stock market should you be worried about changing interest rates,
Well, you should not worry as being our privileged readers we would be providing you with every detail to analyze the changing situation and make a better investment decision.
Let’s learn about how a change in interest rates impacts the performance of the stock market and which are the stocks to buy when interest rates rise.
Impact of interest rates on the stock market
Before we move to the list of stocks to buy when interest rates rise we would like our readers to understand how interest rates impact your stock picks and investment decisions.
If interest rates rise it means the first impact will be the reduction of the amount people invest in the stock market as they would be gaining a higher rate of returns at a safer and less volatile asset.
Many investors would also like to sell their existing stocks and move towards bank deposits. This causes a general fall in share prices across sectors.
Now as bank deposits increase it will directly help the bank gain a better Net Interest margin and drive their performance.
Another sector that benefits from the rise of interest rates is the insurance sector as they would enjoy profits on the safe debt they hold.
In general, the change or rise of interest rates often leads to a suspicion in the minds of investors of whether the US government will be able to control inflation or not whether it will lead to further interest rate hikes or not and under this environment of frenzy and paranoia often the stock market tumbles.
So should you stop investing in the stock market as interest rates rise? We don’t think so we have researched and analyzed to prepare the best list of stocks to buy when interest rates rise. Just keep reading and find the best way to make money by investing in stocks.
Best 8 Stocks to buy when interest rates rise
As the interest rates rise one of the best sectors to focus on will be the financial services with companies involved in banking, investment management, and other financial services bound to profit from rising interest rates let’s look at the best stock to buy when interest rates rise.
1. Bank of America (BAC)
Based on our research and analysis it is one of the best stocks to buy with rising interest rates.
It is one of the biggest banks in the United States of America and has a diversified presence in the finance sector which is bound to help it grow leaps and bounds during these turbulent times.
Being one of the trusted and well-known banks loan volume is expected to grow even with rising interest rates and increasing deposits will add to the rise in net interest margin hence profits are expected to rise high and fast with revenue expected to grow at least 5% in this financial year.
2. Morgan Stanley (MS)
Morgan Stanley known to be the biggest investment banking firm in the United States of America is our next stock pick amidst rising interest rates as it has been able to generate steady cash flows and consistent profit over a difficult period when interest rates were lowered to push growth post covid.
With interest rates rising Morgan Stanley is expected to make rich dividends with rising net interest margins.
The stock is expected to surge by more than 10% in the coming days based on leading analysts and even a stock valuation report suggests it is undervalued and a sharp correction is on the cards.
3. Charles Schwab Corp. (SCHW)
It’s a finance company that provides multiple services like securities brokerage, wealth management, banking, custody, and other investment services.
Our research and analysis find the stock of Charles Schwab Corp to be undervalued and its operations look good to profit from the rising interest rates.
We expect that its net interest margins will bound back to pre-pandemic levels and will drive the growth of the company and lead to a strong performance by its stocks in the near future.
4. American Express Co. (AXP)
It is a company involved in the business of providing financial services with a specialization in selling credit cards, conducting digital payments, and providing travel services.
The American Express is in fact well known for credit cards and many consider it to be the best credit card provider in the United States of America, with a strong surge in spending due to rising interest rates it will lead to an increase in new credit card holders and increased spending to benefit the company.
With the fall in covid-related restrictions, there is an expected rebound in the travel industry which would also be good for the credit card provider.
Based on the above factors and rising interest rates American Express should see a strong bull run in the future making it one of the best stocks to buy when interest rate rises.
5. S & P Global Inc. (SPGI)
It’s involved in analyzing financial data to provide data analytics and credit rating services. The company is well known for working with S&P Dow Jones.
The company is safe from any rise or fall in interest rates as its work involves providing services required at any time and with S&P Global acquiring IHS Markit its valuation only got even more attractive and makes it one of the best stocks to buy when interest rates rise.
6. Goldman Sachs Group Inc. (GS)
It’s a well-known and the largest investment bank in the world. Over the last few years, it has been performing exceptionally well with a strong performance against its competitors and peer companies.
The consumer and wealth management segment of the bank was instrumental in generating a stupendous 15% ROE and 15.8% return on tangible equity.
With the rise of interest rates, the stability of Goldman Sachs makes it a strong candidate for one of the stocks to buy when interest rates rise.
7. Citigroup Inc. (C)
A well-known global bank with a wide geographical presence across the globe and diversified financial services it is one of the banking stocks available on NASDAQ.
Currently, it is going through a radical transformation, and investors must buy and hold this stock to reap the rewards as its strong business performance and ability to generate revenues should lead to strong performance by the stocks of Citigroup.
8. BlackRock Inc. (BX)
It is one of the top US companies and is well known for operating as an asset management company that also provides investment management services to its clients.
One of the differentiating factors which led to us adding this stock to the list of stocks to buy when interest rates rise is the Aladdin risk management software which helps it to provide better service than its competitors.
So we have finally completed our list of 8 stocks to buy with interest rates increasing. We know many might be wondering why only financial services companies were chosen,
So the answer to that is the higher probability of companies involved in banking and related businesses getting better profits as a result of rising interest rates.
This does not mean that other stocks can’t do well but based on our analysis we have provided you with the list of the best 8 stocks which should do well in the coming days as a result of the rise in interest rate.
FREQUENTLY ASKED QUESTIONS (FAQs)
What would happen to the stock market if the feds decrease interest rates?
A decrease in interest rate would lead to a reduction in interest margins but loan volumes would grow as more and more people would look to take advantage of reduced interest rates leading to more business activities and stocks of nonbanking sectors are expected to rise
So we have finished with our exclusive content on the stocks to buy when interest rates rise. But have you made up your mind to start investing in the stock market?
There is no rush take your time and decide on which stocks you wish to have in your portfolio during this turbulent period of rising interest rates.
We hope you enjoyed reading this article and it also helped you understand how interest rates impact the stock market.
We hope to be read again as we publish new and insightful articles in the future, till next time we wish you good luck while investing in the stock market.