These Companies Stand to Profit The Most From Interest Rate Hikes

The Fed raised rates in the U.S. multiple times in 2022, including this week's 0.75% increase. Recent history shows that raising rates is nothing new; however, long-term analysis shows the historic rate increase in June was unprecedented. Investors, investment firms and the stock market felt the after-effects of the interest rate rise.

Inflation casts a looming presence over daily life. Consumer spending may be slowing down, but familiar pain points have turned into chronic issues in the world of real estate with home price increases and borrowing rates at their worst in years. The labor market and job market continue to suffer. Finally, while there have been renewed talks about President Joe Biden’s promised student loan forgiveness, the same can’t be said for credit card debt. ACA International suggests that consumers are falling back into old habits, which could be America’s next crisis. This news may be unsurprising in this economy, especially for a country facing a recession that Elon Musk called inevitable.

Is anything recession proof? The short answer is no, but several sectors stand to gain from raised rates. A savvy investor should adjust accordingly.

Related: Real Estate Debt Investments Offer Relief With 8% to 12%+ Returns in a Yield-Starved World

Banks 

With the threat of a continued rise in interest rates after the Federal Reserve raised its target fed funds rate to a new range of between 2.25% and 2.5%, banks are the top industry in a position to gain leverage. Consider the following:

American Express AXP: The U.S. Federal Reserve considers this credit card company a bank holding company. Given the indicators of credit card debt and spending in a country facing a recession, American Express is in a good position. Additionally, it provides a dividend yield of 1.3%.

Mizuho Financial Group Inc. MFG is involved in banking, trust, securities and other financial businesses. The company is also an international player with operations across the globe and across five segments: retail and business banking, corporate and institutional, global corporate, global markets and asset management. In addition to its diversity, its low cost may make it appealing for new investors or those looking to cash in. Another enticing aspect of MFG is its 5.5% dividend yield.

Don’t Miss: Private Credit Expected to be The Fastest Growing Alternative Investment Over The Next 5 Years

Insurance Companies 

Insurance stocks tend to rise with interest rates. Historically speaking, the relationship between interest rates and insurance companies looks close to linear. Consider these companies when looking for a way to possibly turn a profit during rising rates:

Chubb Limited CB: Although not a household name, it should be. It is the world's largest publicly traded property and casualty insurance company. More importantly, CB has recently notched its 29th consecutive year of dividend growth. That’s stability.

Aflac Inc. AFL: This namesake should take a victory lap. Aflac provides solid service, has over 60 years experience and growth and is the largest provider of supplemental insurance in the United States. All of these characteristics make for an interesting option as a stock. If the stock alone doesn’t catch your eye, consider the fact that when Aflac last raised its payout in November 2021, it upped the quarterly distribution by 21.2% to 40 cents per share.

Looking for ways to boost your returns? Check out Benzinga's coverage of Alternative investments:

• Real Estate: Investors Are Getting Into Real Estate By Purchasing Shares Of Rental Properties For As Little As $100
• Wine: Fine Wine Continues To Outperform The Stock Market - Burgundy Index Up 24% YTD
• Art: Why Billionaires Like Jeff Bezos Invest Millions In Artwork And How Retail Investors Found A Way To Get In On The Action

Photo by Jim Vallee on Shutterstock