Sectors You Could Invest in When Interest Rates Rise

Central banks (CB) worldwide, from the Federal Reserve Bank to the European Central Bank (ECB) and the Bank of England (BoE), have been raising interest rates for the last year.

During this period of increasing rates, stocks and traders have faced challenges due to factors like slow business cash flows, reduced future earnings, limited growth prospects, and diminished liquidity in the market, leaving some wondering which sectors they could invest in.

1. Financials

The financial sector mainly comprises banking stocks. Recent showings suggest that central banks (CB) normalizing interest rates could negatively affect banks that maintain long-term duration securities in their trading account.

Yet, research suggests that well-capitalized banks can weather various economic environments, be it a boom or bust cycle.

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2. Energy

The energy sector includes products related to crude oil, gasoline, natural gas, and various forms of fossil fuels or renewables. Rising interest rates can typically burden the energy industry by increasing operational costs.

However, in the current environment, energy products continue to offer investors the potential for portfolio growth.

» Interested in oil? Learn how to trade crude oil CFDs

3. Healthcare

The healthcare sector encompasses a range of companies, from Pfizer to Johnson & Johnson to CVS. While there are growth stocks in healthcare that can be affected when rates rise, the sector also features numerous value stocks.

Can You Invest During Rising Interest Rates?

Long-term investors typically invest at all times. During market dips, it's crucial to keep an eye on these movements, particularly when selecting reliable and large companies in the financial, energy, and healthcare sectors. Alternatively, if you prefer to time your entry into the market, it's essential to monitor the central bank and their stance on interest rates.

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