What Investments May Do Well In High Interest Rate Environment?

Post date: 2024-04-25 16:42:04 GMT

On April 15, 2024, the U.S. Federal Reserve announced that they will not cut the interest rates. Federal interest rates set the benchmark rate at which most of the lending and borrowing happens in the United States. If the rates are too high, businesses need to make more money to pay back their loans, it’s harder for families to afford a mortgage for a house and so on. Not surprisingly, according to AbleMarkets AI-driven research, many institutional investors sold their equity holdings upon the news. However, many stocks stood out from the rest by actually experiencing net buy institutional flows, in other words, being selected by the institutional investors in the face of rising interest rates. This note explores just which stocks those lucky winners were.

Among the higher-priced stocks, on April 15, 2024, institutions selected to net buy iShares Currency Hedged Msci Germany ETF (HEWG), ProShares MSCI Emerging Markets Dividend Grwrs ETF (EMDV) and Tootsie Roll Industries Inc (TR), among other firms. Let’s look at each of these in detail.

In March 2024, Germany reported the lowest inflation rate since May 2021. It is fair to believe that Germany has conquered the COVID-induced inflation, at least for now. Naturally, institutional investors followed with their investments into the Germany ETF (HEWG).

Emerging markets dividend-paying firms is another way to avoid inflation: emerging markets are typically chosen for their high-growth benefits, while the dividends assure a stable return, independent of the “emerging” bet outcome. Thus, EMDV investment totally makes sense.

Now, onto our domestic corporation: the Tootsie Roll Industries has a 5-year beta of just 0.14. In other words, it is independent of the markets – the company manufactures candy and candy sells at all times, be it high inflation or low.

As the Federal Reserve holds interest rates steady, it's important for investors to carefully consider their investment strategy. AbleMarkets' analysis provides insights into the stock selections made by institutional investors, highlighting investment opportunities that demonstrate potential resilience in a high-interest-rate environment. Subscribe to AbleMarkets today to stay in the know.