For years, rates were kept artificially low, and some reasons why are almost as absurd as the length of time they were kept low. First, it was the global financial crisis in 2008. Then the stock market crashed. Then there was the 2013 taper tantrum, and then COVID-19. The bottom line is that the people in power did everything humanly possible to keep rates low, and now with ridiculous and out-of-control spending, we have the highest inflation rates since the early 1980s.
Now the proverbial chickens are coming home to roost. The Federal Reserve, which tried to start raising rates in 2018, is now forced to. It has been widely speculated across Wall Street that the next two rate increases, in May and June, will be by 50 basis points, something the Fed has not done since 2000. So, what does this mean for investors? Trouble for some sectors like technology, but other sectors like financials and insurance can survive and exploit rising rates.
We screened our 24/7 Wall Street research database looking for companies with stocks rated Buy and that pay dependable dividends and look likely to take advantage of the rising rate environment. It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
American Express
This stock has been strong, and any backup in price should be exploited. American Express Co. (NYSE: AXP) provides charge and credit payment card products and travelelated services worldwide. Its products and services include payment and financing products network services accounts payable expense management products and services, and travel and lifestyle services.
The company’s products and services also comprise merchant acquisition and processing, servicing and settlement, point-of-sale marketing and information products and services for merchants, and fraud prevention services, as well as the design and operation of customer loyalty programs. It sells its products and services to consumers, small businesses, midsized companies and large corporations through mobile and online applications, third-party vendors and business partners, direct mail, telephone, in-house sales teams and direct response advertising.
Shareholders receive a 1.13% yield. Morgan Stanley has a $223 price target on American Express stock. The posted consensus target is $201.41, and shares traded at $184.30 on Wednesday.
Bank of America
Warren Buffett owns a stunning 1.1 billion shares of Bank of America Corp. (NYSE: BAC), which posted very solid fourth-quarter results and, like other banks, it welcomes interest rate increases. The company is a ubiquitous presence in the United States, providing various banking and financial products and services for individual consumers, small and middle-market businesses, institutional investors, corporations and governments in the United States and internationally. It operates 5,100 banking centers, 16,300 ATMs, call centers and online and mobile banking platforms.
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