Finder makes money from featured partners, but editorial opinions are our own.

Investments that might protect you from rising interest rates

Here are some investment ideas that could do well despite rising interest rates.

Rising interest rates can signal a dip in the stock market as more people turn to savings instead of stocks to grow their wealth and companies churn out less profit due to paying higher interest on debt. But which sectors and stocks do well when rates are on the rise? Here are the stocks you should keep an eye on during rate hikes.

What should investors look for during rate hikes?

Not all sectors will perform well when interest rates are rising, so investors shouldn’t expect broad equity market returns. Investing during periods of rising interest rates can be successfully done by shifting toward companies and sectors that tend to do well in the higher rates environment, such as energy, financials, real estate and consumer staples. Companies that have a large cash balance and a track record of consistent dividend payouts tend to perform well during rising interest rates. High dividend stocks in the US outperformed the S&P 500 in 7 out of the 10 rising interest rate periods that occurred since 1960, according to data from Global X Management Company.

4 sectors that perform well during inflation

SectorOur Stock PickLink to invest
EnergyDevon Energy Corporation (DVN)Buy on Interactive Brokers
FinancialsUpstart Holdings (NasdaqGS: UPST)Buy on Interactive Brokers
Real EstatePreferred Apartment Communities (NYSE: APTS)Buy on Interactive Brokers
Consumer StaplesTyson Foods, Inc. (NYSE: TSN)Buy on Interactive Brokers

Finder survey: Which sectors would Canadians from different provinces consider buying stocks in?

ResponseSaskatchewanPrince Edward IslandOntarioNova ScotiaNewfoundland and LabradorNew BrunswickManitobaBritish ColumbiaAlberta
Financials36.59%23.27%17.07%20%15%17.07%19.13%22.54%
Information Technology31.71%50%28.4%21.95%15%25%21.95%24.04%25.35%
Energy29.27%33.33%31.36%19.51%40%30%26.83%27.87%32.39%
Health Care26.83%66.67%25.64%12.2%30%5%21.95%22.95%21.83%
None of the above21.95%21.1%29.27%30%35%29.27%15.3%23.94%
Consumer Staples19.51%16.67%12.03%4.88%25%10%4.88%10.93%10.56%
Real Estate19.51%30.97%24.39%25%25%31.71%25.68%33.8%
Utilities19.51%23.67%24.39%15%10%14.63%22.4%24.65%
Industrials17.07%16.67%15.38%10%10%12.2%16.39%18.31%
All of the above9.76%16.67%15.19%19.51%15%10%14.63%22.95%15.49%
Materials9.76%16.67%11.05%7.32%10%5%9.76%11.48%12.68%
Communication Services7.32%14.2%14.63%10%5%21.95%15.3%14.79%
Consumer Discretionary4.88%16.67%5.92%9.76%5%10%2.44%6.56%7.04%
Source: Finder survey by Pollfish of 1001 Canadians, January 2024

More stock picks from the 4 sectors

Energy

The energy sector has historically been the best performing sector leading up to a peak in inflation, according to data from Refinitiv.

In fact, the energy sector was the best-performing sector in the S&P 500 in 2021. According to financial information and analytics company S&P Global, energy was the only sector that didn’t post a loss in January 2022.

Underproduction in the energy sector can drive up prices. When crude oil prices rise, oil stock prices tend to follow, because a portion of oil companies’ earnings comes from the amount of oil that is sold.

Check out our guides on the best oil stocks in Canada and the United States for more information on stocks to watch.

Energy stocks and ETFs to watch

Devon Energy Corporation logo

Devon Energy Corporation (DVN)

Devon Energy Corporation is an independent energy company that primarily engages in the exploration, development and production of oil, natural gas and natural gas liquids in the United States.

  • Market cap: C$50.833 billion
  • YTD performance: 74.85%
  • 1 Year performance: 143.27%
  • 5 Year performance: 261%
  • P/E Ratio: 14.46
  • Headquarters: United States
Buy on Interactive Brokers

Halliburton Company logo

Halliburton Company (NYSE: HAL)

Halliburton Company provides energy products and services around the world. It assist customers with hydrocarbons location, geological data management, drilling and formation evaluation, constructing and completing wells and optimizing products throughout the life of customers’ assets.

  • Market cap: C$37.838 billion
  • YTD performance: 83.43%
  • 1 Year performance: 69.70%
  • 5 Year performance: 231%
  • P/E Ratio: 24.29
  • Headquarters: United States
Buy on Interactive Brokers

First Trust logo

First Trust Natural Gas ETF (NYSEArca: FCG)

  • Tracks the ISE-Revere Natural Gas Index
  • Top 3 holdings:
    1. DCP Midstream LP: 4.83%
    2. Occidental Petroleum: 4.78%
    3. ConocoPhillips: 4.33%
  • 1Y performance: 92.56%
  • YTD performance: 72.46%
  • Expense ratio: 0.60%
  • Yield: 1.40%
Buy on Interactive Brokers

Invesco logo

Invesco Dynamic Energy Exploration & Production ETF (NYSEArca: PXE)

  • Tracks the Dynamic Energy Exploration & Production Intellidex Index
  • Top 3 holdings:
    1. Continental Resources Inc: 6.35%
    2. ConocoPhillips: 5.09%
    3. Pioneer Natural Resources Co: 5.08%
  • 1Y performance: 94.42%
  • YTD performance: 77.96%
  • Expense ratio: 0.63%
  • Yield: 0.98%
Buy on Interactive Brokers

Financials

Financial stocks generally benefit from a strong economy and higher rates. For banks, higher interest rates mean more money paid out to customers who have savings accounts. But it also means even more profit in the form of interest paid on loans and other debt instruments. Check out the best Canadian bank stocks here.

Similarly, brokerage firms earn money from the interest earned on cash balances held in client accounts and from lending client money elsewhere.

Insurance companies make a profit off the spread between what it owes policyholders versus what it can make with its investments. Insurance companies invest a portion of premiums in the bond market, and when rates are high, it makes more money off that spread.

All this means that the financial sector, which was among the market’s top-performing sectors in 2021, may see growth amid rising rates. That being said, some data suggests that financials may underperform in the year leading up to a peak in inflation.

Investing in financial stocks

Financial stocks and ETFs to watch

Upstart logo

Upstart Holdings (NasdaqGS: UPST)

Upstart Holdings, Inc. is a cloud-based artificial intelligence (AI) lending platform based in the United States. Its platform aggregates consumer demand for loans and connects it to its network of the company’s AI-enabled bank partners.

  • Market cap: C$4.115 billion
  • YTD performance: -67.92%
  • 1 Year performance: -70.41%
  • 5 Year performance: N/A
  • P/E Ratio: 29.44
  • Headquarters: United States
Buy on Interactive Brokers

Wells Fargo logo

Wells Fargo & Company (NYSE: WFC)

Wells Fargo & Company is a diversified financial services company that provides banking, investment, mortgage and consumer and commercial finance products and services in the United States and internationally. It operates through 4 segments: Consumer Banking and Lending, Corporate and Investment Banking, Commercial Banking and Wealth and Investment Management.

  • Market cap: C$170.523 billion
  • YTD performance: -6.59%
  • 1 Year performance: -4.56%
  • 5 Year performance: 114%
  • P/E Ratio: 9.28
  • Headquarters: United States
Buy on Interactive Brokers

State Street Global Advisors SPDR logo

SPDR S&P Insurance ETF (NYSEArca: KIE)

  • Tracks the S&P Insurance Select Industry Index
  • Top 3 holdings:
    1. Goosehead Insurance: 2.41%
    2. Trupanion: 2.38%
    3. Athene Holding: 2.12%
  • 1Y performance: -1.35%
  • YTD performance: 1.35%
  • Expense ratio: 0.35%
  • Yield: 1.29%
Buy on Interactive Brokers

State Street Global Advisors SPDR logo

Financial Select Sector SPDR Fund (NYSEArca: XLF)

  • Tracks the Financial Select Sector Index
  • Top 3 holdings:
    1. Berkshire Hathaway: 12.83%
    2. JPMorgan Chase & Co: 11.47%%
    3. Bank of America: 7.57%
  • 1Y performance: -10.30%
  • YTD performance: -7.15%
  • Expense ratio: 0.10%
  • Yield: 1.74%
Buy on Interactive Brokers

Real estate

Even though rising interest rates can increase borrowing costs for real estate investment trusts (REITs), REITs can benefit from rate hikes because it typically increases real estate owners’ ability to raise rental prices and pass that income on to shareholders.

Behind energy, real estate was the market’s second-best performing sector in 2021. According to investment management firm Cohen & Steers, REITs over the last 3 decades have had a 10.8% annualized return in periods of rising rates and positive economic growth.

Investing in real estate

Real estate stocks and ETFs to watch

Preferred Apartment Communities logo

Preferred Apartment Communities (NYSE: APTS)

Upstart Holdings, Inc. is a cloud-based artificial intelligence (AI) lending platform based in the United States. Its platform aggregates consumer demand for loans and connects it to its network of the company’s AI-enabled bank partners.

  • Market cap: C$1.622 billion
  • YTD performance: 38.21%
  • 1 Year performance: 142.10%
  • 5 Year performance: 98%
  • P/E Ratio: N/A
  • Headquarters: United States
Buy on Interactive Brokers

Bluerock Residential logo

Bluerock Residential Growth REIT (NYSE American: BRG)

Bluerock Residential Growth REIT focuses on developing and acquiring a diversified portfolio of institutional-quality highly amenitized live/work/play apartment communities in demographically attractive knowledge economy growth markets. The Company is included in the Russell 2000 and Russell 3000 indices.

  • Market cap: C$957.142 million
  • YTD performance: 1.17%
  • 1 Year performance: 176.68%
  • 5 Year performance: 97%
  • P/E Ratio: N/A
  • Headquarters: United States
Buy on Interactive Brokers

Vanguard logo

Vanguard Real Estate Index Fund (NYSEArca: VNQ)

  • Tracks the MSCI US Investable Market Real Estate 25/50 Index
  • Top 3 holdings:
    1. Vanguard Real Estate II Index: 11.53%
    2. American Tower Corp: 7.49%
    3. Prologis: 5.62%
  • 1Y performance: -14.79%
  • YTD performance: -0.62%
  • Expense ratio: 0.10%
  • Yield: 2.19%
Buy on Interactive Brokers

Charles Schwab logo

Schwab U.S. REIT ETF (NYSEArca: SCHH)

  • Tracks the Dow Jones Equity All REIT Capped Index
  • Top 3 holdings:
    1. American Tower: 8.77%
    2. Prologis: 6.31%
    3. Crown Castle International: 6.02%
  • 1Y performance: -13.82%
  • YTD performance: 1.33%
  • Expense ratio: 0.07%
  • Yield: 2.34%
Buy on Interactive Brokers

Consumer staples

When interest rates go up, people may be more attracted to saving than spending. Rising costs can cause people to think twice about splurging on big ticket items. But people still need to spend on staples like food, beverages and hygiene products.

Companies that sell these items also battle rising inflationary costs but can usually pass on such costs to consumers.

A recent report from investment management company Hartford Funds shows that, along with energy, equity REITs and financials, the consumer staples sector has outperformed every other sector during periods of rising inflation between 1973 and 2021.

As interest rates go up to battle rising costs, consider investing in stocks that have higher pricing power, as they are able to increase their prices with inflation better than some other industries.

Investing in consumer staples stocks

Consumer staples stocks and ETFs to watch

Tyson Foods logo

Tyson Foods, Inc. (NYSE: TSN)

Tyson Foods, Inc. is a global food company that operates through 4 segments: Beef, Pork, Chicken and Prepared Foods. It sells products to grocery retailers and wholesalers, meat distributors, warehouse club stores, industrial food processing companies, chain restaurants, live markets, international export companies and domestic distributors.

  • Market cap: C$31.603 billion
  • YTD performance: 0.29%
  • 1 Year performance: 11.14%
  • 5 Year performance: 68%
  • P/E Ratio: 7.87
  • Headquarters: United States
Buy on Interactive Brokers

Coca-Cola logo

The Coca-Cola Company (NYSE: KO)

The Coca-Cola Company is a beverage company that manufactures, markets and sells various nonalcoholic beverages worldwide. It operates through a network of independent bottling partners, distributors, wholesalers and retailers as well as through bottling and distribution operators.

  • Market cap: C$272.977 billion
  • YTD performance: 6.35%
  • 1 Year performance: 11.97%
  • 5 Year performance: 58%
  • P/E Ratio: 26.57
  • Headquarters: United States
Buy on Interactive Brokers

State Street Global Advisors SPDR logo

Consumer Staples Select Sector SPDR Fund (NYSEArca: XLP)

  • Tracks the Consumer Staples Select Sector Index
  • Top 3 holdings:
    1. Procter & Gamble: 15.54%
    2. Coca-Cola: 9.88%
    3. PepsiCo: 9.63%
  • 1Y performance: -4.24%
  • YTD performance: 6.71%
  • Expense ratio: 0.10%
  • Yield: 2.21%
Buy on Interactive Brokers

iShares by BlackRock logo

iShares US Consumer Staples ETF (NYSEArca: IYK)

  • Tracks the Russell 1000 Consumer Staples RIC 22.5/45 Capped Index
  • Top 3 holdings:
    1. Tesla: 16.89%
    2. Procter & Gamble: 10.38%
    3. Coca-Cola: 6.51%
  • 1Y performance: 13.59%
  • YTD performance: 1.67%
  • Expense ratio: 0.41%
  • Yield: 2.19%
Buy on Interactive Brokers

Compare stock trading platforms

1 - 6 of 6
Name Product Finder Rating Available Asset Types Stock Trading Fee Account Fee Signup Offer Table description
Interactive Brokers
Finder Score:
★★★★★
4.2 / 5
Stocks, Bonds, Options, Index Funds, ETFs, Currencies, Futures
min $1.00, max 0.5%
$0
N/A
Winner for Best Overall Broker in the Finder Stock Trading Platform Awards.
Moomoo Financial Canada
Finder Score:
★★★★★
3.9 / 5
Stocks, Options, ETFs
$0.014/stock
$0
Get up to $1,200 or a $1,200 Apple gift card
Trade US stocks for up to 90% less and access free real time stock quotes and level 2 market data. T&C's Apply.
CIBC Investor's Edge
Finder Score:
★★★★★
3.7 / 5
Stocks, Bonds, Options, Mutual Funds, ETFs, GICs, Precious Metals, IPOs
$6.95
$0 if conditions met, or $100
100 free trades + up to $4,500 cash back with Premium Edge
An easy-to-use platform with access to a variety of tools to help you trade with confidence.
RBC Direct Investing
Finder Score:
★★★★★
3.8 / 5
Stocks, Bonds, Options, Mutual Funds, ETFs, GICs
$6.95 - $9.95
$0 if conditions met, otherwise $25/quarter
N/A
Enjoy no minimum trading activity requirements and pay just $9.95 per trade or $6.95 if making 150 trades per quarter.
Questrade
Finder Score:
★★★★★
3.9 / 5
Stocks, Bonds, Options, Mutual Funds, ETFs, GICs, International Equities, Precious Metals
$4.95 - $9.95
$0
Get $50 in free trades when you fund your account with a minimum of $1,000.
Opt for self-directed investing and save on fees or get a pre-built portfolio to take out some of the guesswork.
Qtrade Direct Investing
Finder Score:
★★★★★
3.6 / 5
Stocks, Bonds, Options, Mutual Funds, ETFs, GICs
$6.95 - $8.75
$0 if conditions met, otherwise $25/quarter
Get up to a $150 sign-up bonus. Use code OFFER2024. Ends October 31, 2024.
Low trading commissions and an easy-to-use platform with access to powerful tools and a wide selection of investment options.
loading

Online stock trading

At the time of publication, Matt Miczulski owned shares of WFC and HAL.

Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades.

More on investing

Matt Miczulski's headshot
Written by

Editor, Investments

Matt Miczulski is an investments editor at Finder. With over 450 bylines, Matt dissects and reviews brokers and investing platforms to expose perks and pain points, explores investment products and concepts and covers market news, making investing more accessible and helping readers to make informed financial decisions. Before joining Finder in 2021, Matt covered everything from finance news and banking to debt and travel for FinanceBuzz. His expertise and analysis on investing and other financial topics has been featured on CBS, MSN, Best Company and Consolidated Credit, among others. Matt holds a BA in history from William Paterson University. See full bio

Matt's expertise
Matt has written 5 Finder guides across topics including:
  • Trading and investing
  • Broker and trading platform reviews
  • Money management

More guides on Finder

Ask a Question

You must be logged in to post a comment.

Go to site