Stave Off Rising Rates Anxiety With These ETFs & Stocks

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Markets collapsed and moved into a correction territory on rising rate worries this month. Many fear that stocks may slip due to the fear of gradual creases in cheap dollar inflows. But are rising rates worth this fear?

At least, a CNBC article defies this worry by using Kensho, a hedge fund analytics tool. The findings of the article displays that the market went up substantially during five of six circumstances and dropped slightly "during the one lagging period ."

After all, these rising rates point to an economic pickup. Signs of a recovery, albeit moderate, in the U.S. economy, are now evident thanks to a solid labor market, manufacturing activity and housing data points.

Improving wage gains, decent-though-not-great inflation, moderate retail sales, Trump bump, the passing of the tax reform and last but not the least uptick in global growth should not cause a prolonged bloodbath in the market.

CNBC's analysis reveals that the Nasdaq offered 42.95% average gains in a major era of rising rates (six times since 1988) while the S&P 500 and the Dow Jones jumped 23.4% and 23.1%, respectively.

Let's highlight the sectors that are seen to have established a solid uptrend in major rising rate periods.


CNBC noticed that Information Technology is the sector which shot up the most (up 47.99%) during the rising interest rate time frames. In any case, emerging new technologies like cloud computing, big data and Internet of Things are expected to pull the sector forward in the coming days. So, investors can definitely play Zacks Rank #2 (Buy)  Technology Select Sector SPDR Fund XLK (read:  How to Invest in the Hottest Technologies With ETFs ).

Micron Technology Inc. MU

This Zacks Rank #1 (Buy) semiconductor stock also boasts a VGM Score of A. It belongs to a top-ranked Zacks industry (top 1%).

Consumer Discretionary

CNBC's findings show that the consumer discretionary sector rose 31.6% on average in the major periods of rising rates. iShares U.S. Consumer Services ETF IYC can thus be played with this ETF. With American consumer spending likely to get a boost from tax reform and higher spending, a bet on this fund is warranted (read: 3 Top-Ranked Sector ETFs to Buy ).

Deckers Outdoor Corporation DECK

This Zacks Rank #1 footwear, apparel and accessories company belongs to a top-ranked industry (top 14%).


Financials is always a rising rate beneficiary. The sector jumped 30.1% on average in major rising rate environments, as per CNBC. iShares U.S. Regional Banks ETF IAT can thus be an intriguing bet in a rising rate environment.

American Financial Group Inc. AFG

This Ohio-based financial company has a Zacks Rank #1 and belongs to a top-ranked industry (top 20%).


As per Fidelity , sectors like industrials do better in the mid-cycle phase of the economy. In any case, an industrial boom is apparent in the U.S. economy due to the narrowing wage differential between developed and emerging economies. Average Industrials' gains are 29.1% in a key rising rates environment. Plus, Trump is likely to boost infrastructure spending in the coming days. All these make iShares U.S. Industrials ETF IYJ , a Zacks Rank #3 (Hold) fund, a great pick.

Applied Industrial Technologies Inc. AIT

The company is a leading industrial distributor with a Zacks Rank #1. It belongs to a top-ranked Zacks industry (top 27%).


Average gains in the materials' sector was 27.3% in major periods of rising rates. U.S. tax cuts, upbeat global growth and the resultant strong international demand plus the likely beefing-up of infrastructure spending by the government should lead to higher demand related to industrial production, which in turn feeds into seasonal strength in the material sector. This makes Materials Select Sector SPDR ETF XLB our pick for 2018 (read: 3 Sector ETFs for 2018 ).

Allegheny Technologies Inc. ATI

Zacks Rank #1 company, a global manufacturer of specialty materials and complex components, belongs to a top-ranked industry (top 3%).

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SPDR-TECH SELS (XLK): ETF Research Reports

SPDR-MATLS SELS (XLB): ETF Research Reports

ISHARS-US RG BK (IAT): ETF Research Reports

ISHARS-US CN CY (IYC): ETF Research Reports

ISHARS-US INDU (IYJ): ETF Research Reports

American Financial Group, Inc. (AFG): Free Stock Analysis Report

Applied Industrial Technologies, Inc. (AIT): Free Stock Analysis Report

Deckers Outdoor Corporation (DECK): Free Stock Analysis Report

Allegheny Technologies Incorporated (ATI): Free Stock Analysis Report

Micron Technology, Inc. (MU): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , ETFs
Referenced Symbols: XLK , XLB , IAT , IYC , IYJ

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