The Best Investments for Rising Interest Rates

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While there have been lots of headlines and hand-wringing on inflation lately, thus far interest rates, which tend to surge along with inflation, have remained tame. Rates on everything from savings accounts to mortgages are still bouncing along near historic lows.

The question is, how long can that last?

One school of thought, advanced by the Federal Reserve, is that inflationary pressures, now showing up as higher prices on everything from used cars to factory wages, are “transitory” and will begin receding as pandemic labor and supply chain shocks subside.

Others think inflation is here to stay. That could have a negative impact on both stocks and bonds. That’s because the fate of both stocks and bonds, along with many other investments, is intimately tied to interest rates.

When rates are low, as they have been for a decade, companies pay less to borrow and have more to spend, which boosts profits. When rates rise, the opposite occurs: higher borrowing costs, lower profits, lower stock profits.

Rising rates also mean that safer investments, like savings accounts and government bonds, will look increasingly attractive relative to stocks, resulting in money leaving stocks, driving down prices.

What’s an investor to do? That’s what this week’s “Money!” podcast is about. We’re going to explore specific investments that can not only survive but thrive in rising-rate environments.

As usual, my co-host will be financial journalist Miranda Marquit. Listening in and sometimes contributing is producer and novice investor Aaron Freeman.

Sit back, relax and listen to this week’s “Money!” podcast:

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