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Profit from the Pros

I Am Betting on Higher Rates

The stock market continues to meander in 2017. This is partially about profit taking after the post-election rally. And partially about the need for more clarity on the new administration's policies.

What is nearly certain is the call for higher rates. The equation is quite simple:

Rates are still historically low + signs of rising inflation + economic acceleration + growth oriented Trump administration + stronger Fed statements to raise rates = rates should be on the rise.

There are two good ways to profit from higher rates.

1)  Short the bond market. ETFs are the best way to go with TMV as my personal fav.

2)  Buy bank stocks because their profit margins expand with higher rates. The smaller the bank the bigger the growth opportunity. In that world is literally hundreds and hundreds of publicly traded banks. Because of that I am going the ETF route with QABA and KRE as the best bets.

Best,

Steve Reitmeister

Executive Vice President, Zacks Investment Research

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