Interest Rates and Market

Fed has made it clear that there will be likely 3 interest rates hike. Next week Fed meeting will likely start the first hike.

What happens when there is a interest rate hike?

The rate to borrow money becomes costly.  So the companies which runs on debt starts to become less profitable.

  • Mortgage Lenders lending rated goes down — Like MBB, FNMA, FMCC, GNMA see drop in sales
  • Auto companies sales goes down — Like F,GM,TM,HMC,TSLA,THO,WGO see drop in sales
  • Real Estate Developers sales goes down — IYR, ARE, AVB, GRT, HT, LXP, RPT, RYN, HOT, DCT, AXR, BXG, COR likely will see their sales drop
  • Commodities goes down – GLD, GDX, NUGT

There are few companies which profits from rising interest rates

  • Credit Card companies — V,MA,COF,AXP,DFS
  • Banks — FAS, XLF, GS, JPM, C, MS

What to be beware of?

The most famous saying about rising interest rates is by legendary market technician Edson Gould, who formulated the “three steps and a stumble” rule. Basically, the rule says that the stock market tends to fall after the Federal Reserve has raised the fed funds rate three times.

Here is an article which provide more  in depth view

Wiz Investments

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