Sell these stocks as interest rates rise


The Federal Reserve is widely expected to lift interest rates this week, and most analysts believe at least two more rate hikes are likely to occur through the remainder of the year.

With rates on the rise, investors need to have a good understanding of what impact higher rates could have on their portfolios. Yesterday we took a look at a list of stocks that stand to benefit from rising rates, and today we want to take the opposite approach and focus in on a few companies that could be hurt.

The obvious victims will be companies that thrive when it is cheap for consumers to borrow money. It is not a mere coincidence that the housing market has been so strong while interest rates were near zero. It is much easier to afford a new home when you can borrow money cheaply, and while rates will remain very low on a historic basis, any increase has the potential to impact the sector.

Automotive companies also prosper when rates are low, so there will be pressure on major automakers as rates start to rise.

Another segment of the market that could take a hit is dividend stocks. Investors love yield, so when interest rates were near zero, a lot of money flowed into dividend stocks, and we could see a transfer back into more traditional fixed income assets as interest rates move higher.

Let’s take a look at five stocks that could come under pressure as rates rise, and you could use these examples and the logic behind the opinions to gauge other stocks in your portfolio as well.

Michael Fowlkes

Michael Fowlkes

Michael Fowlkes is a financial writer who has been with the Fresh Brewed Media family since 2004. Over the course of his tenure with Fresh Brewed Media, he has worn many hats, including portfolio manager, options analyst, and writer. Michael received his undergraduate degree from Virginia Tech in Accounting and got his start in finance working as a stock trader for six years at Chase Investment Counsel in Charlottesville, Va.

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