Financials, energy sectors most at risk from Fed rate hikes: Investment strategist
Fed expected to start tightening cycle next month
During an interview on "Mornings with Maria" investment strategist Michael Kantrowitz described how the Fed's interest rate hikes could impact the economy, arguing that the financial and energy sector could take the biggest hit.
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MICHAEL KANTROWITZ: We're specifically talking about long-term interest rates. And so there's a general conventional wisdom that when the Fed raises interest rates, all interest rates go up and when you look back at the last seven tightening cycles since 1980. That was true in five of those cycles. Long-term interest rates did rise in two of them. However, that was not the case. And so we… dug in and looked into what was the difference in those two cycles where rates didn't rise compared to those other five? And the one thing that was very clear it was all about the momentum in the economy. And so the where the Fed is starting this tightening cycle next month, is going to be basically at the beginning of a downtrend in global growth as measured by earnings, PMI'S, confidence, business confidence. And so you really have to look at those two periods that were the exception were actually long term rates declined with the slowdown, rather than those other five examples where the economy was just starting to re-accelerate. And so, yeah, I think financials, which is by far the most popular… sector on the street, maybe next to energy is most at risk here as investors have been heavily tilted their portfolios in 2022 toward stocks that would benefit from higher rates. And if rates stop going up as we believe that's going to be imminent, and even decline in the back half of this year, then those positions are going to be underperforming, most likely.
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WATCH THE FULL INTERVIEW HERE: