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Tips on Where to Invest as Rates Rise

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  • (1:00) - No More Recession: Is The Economy Making A Turn Around?
  • (9:20) - Dynamics of The Stock Market:  Breaking Down The Current Status of The Market
  • (14:05) - How Will Raising Interest Rates Impact The Market?
  • (21:45) - What If Inflation Accelerates Faster Than Expected?
  • (32:00) - Top Stocks To Keep On Your Radar: Where Should Investors Be Looking?
  • (37:15) - Episode Roundup: JPM, BAC, GS, PNC, WFC, WSBC, UCBI


Welcome to Episode #289 of the Zacks Market Edge Podcast.

Every week, host and Zacks stock strategist, Tracey Ryniec, will be joined by guests to discuss the hottest investing topics in stocks, bonds and ETFs and how it impacts your life.

This week, Zacks Chief Equity Strategist, and economist, John Blank, joins the podcast to discuss the state of the economy, the Fed’s game plan and where you should invest if rates should rise sooner than expected.

Don’t Get Complacent About the Fed

The Federal Reserve has a statutory required dual mandate: full employment and inflation at 2% or under.

For years, the Street didn’t much care about the inflation component.

But in 2021, as inflation has soared due to the pandemic, it has suddenly come into play.

The Federal Reserve has been saying that the inflation is transitory. But companies are now reporting third quarter results and there doesn’t appear to be any let up in the pricing pressures, and price increases, from companies.

With unemployment on its way towards the Fed’s target of full employment, which is 3.5%, it may have to address the inflation component sooner in 2022 than anticipated.

And that could mean increases in the Fed Fund’s rate.

The bond yields will start to rise well ahead of any actual raising, but what will it mean for the stock market if the 10-year jumps back over 2%?

Where to Invest for Higher Rates

According to John, REITs and utilities will get hammered in a higher Fed Fund’s rate environment.

Ditto for income stocks.

But banks, which have been mostly ignored for the last decade, will see rising earnings as the 10-year rises.

In such a scenario, investors should consider the “winners” in the category which include JPMorgan Chase (JPM - Free Report) , Bank of America (BAC - Free Report) and Goldman Sachs (GS - Free Report) .

Big regional banks like PNC Financial (PNC - Free Report) will also be beneficiaries.

Look for banks in quickly growth areas of the country like United Community Banks (UCBI - Free Report) , which does business in the hot southeast region which is attracting new Millennial workers, new businesses and has some of the hottest home building markets.

What else should you know about investing in a rising rate environment?

Tune into this week’s podcast to find out.

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