We are often asked as investment advisers, where we would invest today. Currently, we like Consumer Staples. We like companies like PepsiCo. (NYSE: PEP), Altria Group Inc. (NYSE: MO) and Wal-Mart Stores (NYSE: WMT). We recommend looking at under-levered companies without much debt. If they have debt, investors should consider companies that are big and financially strong enough to be able to borrow at lower rates.
We also consider looking at Financials, as we believe you cannot have a long-term economic recovery without Financials doing well. We are still a little hesitant toward banks, as we believe they will have to deal with increasing regulations for years to come, regardless of the presidential administration in office. The Financial sector is not all banks. Investors may want to consider money manager like T. Rowe Price Group, Inc. (NASDAQ: TROW) or credit card issuers like American Express (NYSE: AXP). We also like big Industrial companies—those that do business internationally and have a low cost of capital.
While Utilities offer constant earnings and stable dividends, they may suffer as interest rates increase.
For Consumer Discretionaires, we think lower end restaurants like McDonald’s Corp. (NYSE: MCD) are poised to do well in a rising interest rate environment. With their low cost menu, McDonald’s can be a stable Discretionary stock. Otherwise, Discretionaries could be an interesting play when the consumer becomes more stable. Companies that capitalize on high income people may do well. Coach, Inc. (NYSE: COH) was hit hard because they lost their luxury luster. It was no longer a luxury to have a Coach bag. This is where Michael Kors Holdings, Inc. (NYSE: KORS) was able to gain market share. Coach is rebranding their image to recapture their luxury appeal, so their recent decline may present a buying opportunity. However, investors need to keep in mind predicting fashion trends is as impossible as predicting the market.
At Henssler Financial we believe you should Live Ready, and that includes understanding how stock sectors may fare during a rising interest rate environment. If you have questions regarding your financial situation, contact the Experts at Henssler Financial: