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March 17, 2022
The Federal Reserve did something unexpected.
Not only did the central bank raise interest rates a quarter point, it reduced its 2022 US GDP growth estimates from 4% to 2.8%, and increased its inflation guide from 2.6% to 4.3%.
It’s also penciling in another six rate hikes this year, bringing us to about 1.75% to 2% by year-end—unless something disastrous happens between now and then.
That should have sent market lower.
Yet, stocks exploded higher.
All because the Federal Reserve finally provided clarity. You see, stocks haven’t been falling on fears of rate hikes, they were falling because of uncertainty. Now that we know what the Fed is going to do moving forward, we have far more clarity.
So, with interest rates on the rise, where should be invest?
One of the best places may be in financial stocks.
That’s because the sector is among the most sensitive to changes in interest rates. When rates climb, margins expand, which is good for banks, and brokerage firms.
Look at. Bank of America, for example.
“Analysts are bullish on shares because among the big banks Bank of America is one of the most sensitive to interest-rate hikes. With it widely expected that the Fed will raise interest rates at least three times this year, Bank of America would be poised to benefit more than peers,” as noted by Barron’s.
Or, if you can invest in an ETF, such as the Financial Select Sector SPDR Fund (XLF). With exposure to Berkshire Hathaway, JP Morgan, Bank of America, Wells Fargo, Morgan Stanley, and Goldman Sachs, for example, it should do well with rising interest rates.
The Dow is down 90 points to 33,864
The S&P 500 is down about 11 points to 4,338.75
The NASDAQ is down 41 points to 13,909.75
Gold prices are up $14.14 to $1,941.51
Bitcoin is up about 1% to $40,924.41
Oil prices are up $5.67 to $100.70
The VIX down 3.02 points to 26.81
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