Stocks To Watch If Interest Rates Start To Fall

Treasury yields continued to rise on Tuesday, with the 10-year yield reaching its highest level since 2007. Stocks took a hit, with the SPDR S&P 500 Trust SPY trading down more than 1.5% on the day. 

But, as stocks move lower and rates inch higher, inflation could also cool down and allow the Federal Reserve to start thinking about pausing or cutting interest rates. If the Fed is indeed able to start cutting rates at some point in the next year or so, here are the stocks and industries to keep your eye on:

REITs And Real-Estate Stocks

REITs, or Real Estate Investment Trusts, have been hit hard in the last year as interest rates creep higher. Prologis Inc PLD, the largest REIT by market cap, is down more than 12% in the last month as high rates weigh on the industrial real estate market. Other REITs to watch are VICI Properties Inc VICI, Simon Property Group Inc SPG and Crown Castle Inc CCI. 

Also Read: 10-Year Treasury Yields At 16-Year Highs Shake Markets: How Far Can They Climb?

Financials 

Banks, particularly regional banks, have gotten hit harder than any other industry during this interest rate hike cycle. Higher rates have destroyed the value of a lot of treasury bonds that banks like Silicon Valley Bank bought when the economy was hot and money was flowing. 

Any drop in interest rates should catalyze economic activity, stimulating lending and borrowing. Beaten-down banks like Bank of America Corp BAC, Western Alliance Bancorporation WAL, and JPMorgan Chase & Co JPM should be on your radar when the Fed takes action. 

Technology/Growth Stocks

If you like investing in growth stocks, you know that rate-hike cycles can be particularly difficult times. Because a lot of growth companies aren’t making profits yet, higher interest rates are significantly challenging as it makes it more expensive to borrow money. 

High-growth tech stocks could become highfliers once interest rates start to cool down. Keep an eye on Upstart Holdings Inc UPST, an AI-driven personal loan company. Lower interest rates should increase demand for personal loans, driving customers to the company.

Other growth stocks that could benefit from lower interest rates are Asana Inc ASAN, Shopify Inc SHOP and SoFi Technologies Inc SOFI. 

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