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Stocks jumped Friday despite a strong jobs report initially worrying investors that the Fed would have to raise rates one more time and keep them there longer. The fact that those fears of higher rates may come true and that only three of the 11 stock sectors closed higher leads me to believe the recent pullback in stocks isn’t over just yet. That’s why I went looking for stocks that have been able to buck the recent downtrend, companies benefiting from higher rates and outperforming.
Even after Friday’s rally, stocks in the S&P 500 are down more than 7% since the beginning of August and if this week’s CPI inflation report doesn’t bring good news, the pullback could return with a vengeance.
During this, the usual safety plays have failed miserably. Stocks in the Consumer Staples sector have fallen 12% while those in the Utilities sector are down 15% over the period. The stable cash flows of these companies haven’t been enough to bring investors back versus rising yields in fixed income.
But that doesn’t mean there hasn’t been anywhere to hide. We’re seeing some interesting parts of the market pop up as ‘the new safety stocks’ in this era of higher-for-longer interest rates.
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Joseph Hogue, CFA spent nearly a decade as an investment analyst for institutional firms and banks. He now helps people understand their financial lives through dividend stocks, investing and ways to make more money. He has appeared on Bloomberg and on sites like CNBC and Morningstar. He holds the Chartered Financial Analyst (CFA) designation and is a veteran of the Marine Corps.
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