What stocks do well with high interest rates?
Along with Berkshire Hathaway Inc. (NYSE:BRK-B), JPMorgan Chase & Co. (NYSE:JPM), and Citigroup Inc. (NYSE:C), The Charles Schwab Corporation (NYSE:SCHW) is one of the biggest stocks that benefit from high interest rates.
Financials First
The financial sector has historically been among the most sensitive to changes in interest rates. With profit margins that actually expand as rates climb, entities like banks, insurance companies, brokerage firms, and money managers generally benefit from higher interest rates.
Higher interest rates tend to negatively affect earnings and stock prices (with the exception of the financial sector). Higher interest rates also mean future discounted valuations are lower as the discount rate used for future cash flow is higher.
For example, financial sectors like banks may benefit, while real estate and utilities could suffer due to their reliance on borrowing. Higher rates are often implemented to control inflation, but while stabilizing prices, they can dampen economic growth, affecting overall market performance.
Buy or Invest in Real Estate
Real estate prices tend to rise with and often even outpace interest rates. Buying real estate or investing in real estate investment trusts (REITs) is another way to realize profits from a rising rate environment.
- Microsoft Corporation (NASDAQ:MSFT) Number of Hedge Fund Holders: 302. 5-year Share Price Performance: 255.8% ...
- Apple Inc. (NASDAQ:AAPL) ...
- The Trade Desk, Inc. (NASDAQ:TTD) ...
- Fortinet, Inc. (NASDAQ:FTNT) ...
- Broadcom Inc. (NASDAQ:AVGO) ...
- Cadence Design Systems, Inc. (NASDAQ:CDNS)
Cash, cash equivalents, short term debt, and financial securities are four investments that tend to profit when interest rates rise. Stay away from long term bonds and bond funds, as interest rates go up, as these investments will tend to decline in value.
These outcomes benefit consumer staples retailers that also sell discretionary goods. Shoppers at Target and Walmart, for example, may start putting more items in their carts. Second, if the falling interest rates cannot prevent recession, many investors will likely move into consumer staples stocks defensively.
Investing in stock and bond markets during interest rate-cutting periods has historically delivered inflation-beating returns.
Tech Still Rules the Roost
Tech continues to dominate in 2024. As businesses expand digital capabilities, demand soars for everything from cybersecurity to cloud services and data analytics. 5G infrastructure is the backbone supporting much of this tech-fueled future, delivering internet speeds 10 times faster than 4G.
What is the highest interest rate in history?
This made money in savings accounts worth more. On the other hand, all interest rates rose, so the cost of borrowing money increased, too. Interest rates reached their highest point in modern history in October 1981 when they peaked at 18.63%, according to the Freddie Mac data.
Pros. Bank stocks increase in value during periods of inflation, which makes them appealing to investors. Higher net interest margins: Banks earn money from the difference between the interest rates they charge on loans and the interest rates they pay on deposits.
High-Yield Savings Accounts: While less common, some high-yield savings accounts or certificates of deposit (CDs) may offer interest rates around 8 percent, though these rates are usually subject to change and may vary by institution.
- Ask the seller to reduce the mortgage rate. ...
- Use part of your down payment to pay down debt. ...
- Use home buyer assistance programs. ...
- Ask the seller to finance the purchase. ...
- Don't wait for a rate you like better. ...
- Don't get distracted by things you don't need. ...
- Buy a house that needs work.
- Pelican State Credit Union - 6.05% APY on balances up to $10,000. ...
- Credit Union of New Jersey - 6.00% APY on balances up to $25,000. ...
- Fitness Bank - 6.00% APY on balances up to $25,000. ...
- Orion Federal Credit Union - 6.00% APY on balances up to $10,000.
| Ticker | Company | Performance (Year) |
|---|---|---|
| NVDA | NVIDIA Corp | 287.22% |
| SOUN | SoundHound AI Inc | 267.76% |
| SYM | Symbotic Inc | 177.62% |
| AVAV | AeroVironment Inc. | 79.01% |
See the 10 stocks
The Motley Fool has positions in and recommends Advanced Micro Devices, Apple, HP, Meta Platforms, Microsoft, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft.
- Palo Alto Networks, Inc. (NYSE:PANW) ...
- Tesla, Inc. (NASDAQ:TSLA) ...
- Snowflake Inc. (NYSE:SNOW) ...
- ServiceNow, Inc. (NYSE:NOW) ...
- Adobe Inc. (NASDAQ:ADBE) ...
- Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) ...
- Advanced Micro Devices, Inc.
- High-yield savings accounts.
- Certificates of deposit (CDs) and share certificates.
- Money market accounts.
- Treasury securities.
- Series I bonds.
- Municipal bonds.
- Corporate bonds.
- Money market funds.
- Stocks.
- Real Estate.
- Private Credit.
- Junk Bonds.
- Index Funds.
- Buying a Business.
- High-End Art or Other Collectables.
Which sector is performing well in stock market?
| S.No. | Top Sectors in Indian Stock Market |
|---|---|
| 1. | Health and Insurance Sector |
| 2. | Renewable energy Sector |
| 3. | IT Sector |
| 4. | Real Estate Sector |
| S.No. | Name | CMP Rs. |
|---|---|---|
| 1. | Cons. Finvest | 237.80 |
| 2. | West Coast Paper | 611.30 |
| 3. | Andhra Paper | 500.90 |
| 4. | C P C L | 877.30 |
Along with generating a larger income stream, such bonds may be subject to less interest rate risk, as there may be a reduced chance of rates moving significantly higher from current levels. However, even when interest rates are low, bonds can still be appropriate for inclusion in a well-diversified portfolio.
In later stages of an interest rate hike cycle, bond investments often become increasingly attractive. As rates climb, yields on bonds rise, presenting opportunities for higher returns. These enhanced yields can sometimes surpass those offered by high dividend stocks, often with lower risk.
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