Most analysts in the stock market bemoan rising rates, but it’s not bad for every company across the board. Some stocks continue to turn a profit even as the Fed raises interest rates. Hedge fund analytics firm Kensho ran a report on the five most profitable stocks when rates are rising. Unsurprisingly, they’re mostly in the financial sector, but as always, it’s always best to consult a financial advisor before you make any moves in the market.
Goldman Sachs (GS)
Goldman Sachs was the best performer in this report, returning nearly 17% over an average of 10 years. The financial organization is at the heart of American business and continues to do well even when rates are rising. The analysis backtested data in which GS stock was bought at the beginning of a rate hike and sold three months later. The result was a net positive 83% profitable trades over the course of ten years.
Microsoft came up right behind Goldman Sachs with an average ten-year return at around 12%. MSFT performed better in the same ten-year backtest though, with an average of 92% positive trades when the stock was bought at the beginning of a rate hike and then sold three months later.
Visa performed about as well as Microsoft during testing, with average 12% returns. However, V performed even better with the three-month buying and selling period seeing 100% of trades performed return a positive income after the sell. That’s not surprising considering Visa is the world’s largest credit vendor and benefits the most from rising interest rates.
Apple came up right behind Microsoft and Visa with around 11.83% average return over a ten-year period. Unfortunately, out of all the stocks on this list, it is the one with the lowest trade positive rate. Only 73% of the three-month trading windows over a ten-year period returned a positive trade.
JP Morgan-Chase (JPM)
JP Morgan-Chase rounds out the last pick with a return of 10.92% right below Apple. Considering it is one of the largest financial institutions in the United States, it’s not surprising that the three-month trade positive rate was 83%, matching that of Goldman Sachs.
It’s not surprising that three of the top five stocks on this list are in the financial sector, where companies benefit from rising rates. The rate of return on Visa trades is outstanding, even if the gains are less than Goldman Sachs. As interest rates continue to rise, day trading financial stocks might be your best bet for making a solid return. Swing traders who are interested in testing the three-month buy at rates climbing and selling later might also make good returns as long as the rates continue to rise. The Fed has already signaled that rates will continue to rise throughout the rest of 2018 and ‘several more’ will be scheduled for 2019. The upbeat economy has the government ready to remove some of the stimulus that it needed to recover from the 2008 financial crisis.