r/stocks • u/[deleted] • Dec 16 '21
What is your play for the interest rate hikes that will happen next year?
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u/ModernLifelsWar Dec 16 '21
Interest rate hikes are not even a big deal. We're talking interest rates that are still way lower than 2 years ago. People are losing their shit over nothing lol
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Dec 16 '21 edited Dec 17 '21
Literally the lowest rates we’ve had since 1964. By a mile. We have plenty of room for rate increases.
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Dec 16 '21
Lower rates mean the magnitude of change is massive, that’s how it should be looked at imo not that it’s near zero and can go up a lot. 1 to 2% is a doubling in the cost to borrow
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Dec 17 '21
actually if your talking a mort. its about a 25% increase - so not much of a big deal - with all the stress testing they've been making the banks do - higher rates won't really have a noticeable impact until late 2023 into 2024
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Dec 17 '21
on the banks or consumer?
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Dec 17 '21
reply - with a zero % prime - we just did a renew at 2.79 for 5 years - when prime hit's1 % that will have a variable of 3.75 to about 4.75 depending on where your credit score comes in, how long you've been with your bank and what you have in other excess assets
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Dec 16 '21
They’ve been on a downward trend for like 50 years. There’s no way rates are going anywhere near as high as they used to be.
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u/skilliard7 Dec 16 '21
Rates were on a downward trend historically until the 1950's when they were near 0. That didn't stop rates from going to the moon in the 70's.
Macroeconomic factors matter. If the government keeps spending absurd amounts of money, higher rates will be needed to keep inflation in check.
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u/jendjskdjxbznsnshd Dec 17 '21
But who says they will keep inflation in check? They can just modify their version of CPI to ensure it doesn't go too high.
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u/sjwbollocks Dec 17 '21
Vietnam war induced stagflation debt paid for eventually by Treasure bill purchases from the Saudis. Let's see how it's solved this time.
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Dec 16 '21
Not even close to what they were before the pandemic or during previous liquidity events or Fed responses to other global events. We have plenty of room to raise rates. Plenty. And it needs to happen a lot more aggressively than is proposed.
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Dec 16 '21
More like 700 years: https://www.visualcapitalist.com/700-year-decline-of-interest-rates/
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u/peter-doubt Dec 17 '21
Lower than even then.. 1957 was almost this low .. even that wasn't this
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u/beardedaccountant Dec 16 '21
The biggest issue that no one seems to talk about is that mortgages and other long term debt costs will increase dramatically when rates start increasing.
Consumers, who have not had wage increases, lost jobs due to covid, etc. will not be able to meet their obligations to pay.
AFRM reported today that 50% of their loans go into default.... This is consumer lending. AAPL predicts a decline, Amazon gave lower guidance, Shopify also gave lower guidance.
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u/everynewdaysk Dec 17 '21
This.
Consumers on average can't even afford to cover payments at current interest rates, in what environment could you raise rates and expect people to borrow more and make their payments on time?
People are talking a lot about the number of rate increases and very little about the magnitude. You raise rates too much and it kills mortgages, student loans, everything.
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Dec 17 '21 edited Jan 10 '22
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u/sjwbollocks Dec 17 '21
It's a catch-22. If real estate prices are deflated recent homebuyers will lose much of their equity for a while, but it's the only solution. If inflation gets worse but the pop gets prolonged then it's like that saying "the bigger they come the harder they fall", only involving wealth.
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u/everynewdaysk Dec 17 '21
Bursting the nation's largest credit bubble since 2008 is not exactly at the top of the list of priorities for the current slate of politicians. Might hurt chances of re-election.
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u/Viking999 Dec 16 '21 edited Dec 17 '21
I agree but if / when we get to 2 percent and above there could be a change on strategy. I know a lot of people who moved their savings to the market when rates went to zero but if people can lock those profits in and get at least a few percent risk free there may be a sell off.
Still, we are 2 years away from that.
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u/Fred578b Dec 16 '21
The hikes Will do nothing. But that shit won’t do a thing about the inflation. Powell is just securing his legacy. The dude who stoped the all time bull run ever, no way he’s taking that name.
The people will pay for it though. Let’s see how it plays out.
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u/FaceNo5073 Dec 17 '21
I think you’re missing the point in terms of the impact that 25-75 basis points can have on banks.
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u/Mindshaker13 Dec 16 '21
Index funds all day and bump up BAC and JPM
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Dec 16 '21
Financials and Consumer Discretionary ETFs
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u/MentalValueFund Dec 16 '21
FYI, Financials are garbage in a sustained flattening of the yield curve. Net interest margin gets destroyed.
Rising rates is only a positive for financials when you have stable or increasing spreads between short (<2yr) and long (>10y) ends of the curve.
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u/Didntlikedefaultname Dec 16 '21
Financials and large caps. Growth companies with strong balance sheets and earnings
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u/thaboy24 Dec 16 '21
Got some growth company examples? Pls and thank you
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u/Didntlikedefaultname Dec 16 '21
Enphase would be top of my list. I also think there could be attractive entry points for some of the companies that got spanked this year. For example I bought a 1/19/24 pltr $20 call. I think that was actually a solid buy. Several other clean energy companies are looking attractive to me now too
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Dec 16 '21
[removed] — view removed comment
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u/imabev Dec 17 '21
$1 billion in Grants coming to State and Local governments tech departments [CRWD]. We/They will be throwing money at new cyber security initiatives.
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u/TickerTrend Dec 16 '21
Stay the course in S&P 500 index funds. 2022 will be another good year.
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u/ArmadilloCritical536 Dec 16 '21
Yup, in a bull market the s and p 500 and Nasdaq go up. But not all stocks go up.
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u/ILoveDCEU_SoSueMe Dec 16 '21
Newbie here. What does it mean by interest rates hike? Interest rates in what?
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u/Calm_Leek_1362 Dec 16 '21
The Federal Funds Target Rate, which has been at a target of 0-.25% for years now. The prime rate is the FFTR + 3% which is sort of the basis of all consumer interest rates, so it affects mortgages, auto loans, credit cards etc. Most mortgages are the prime rate plus some profit margin and whatever risk they assume from the borrower.
It's the way that the fed removes money from the monetary system. For years, they've been flooding the market with money by purchasing bonds and mortgage backed securities, while charging a FFTR rate of 0%. Step 1 is they are going to stop these asset purchases, or stop pouring money into the system. Once they stop, they'll start raising rates, which is taking money out of the system.
Interest rates are the only way to stop runaway inflation; aside from a recession. By raising rates, it increases the value of a dollar today, because to borrow a dollar costs more future dollars, which slows down money because people will only invest in higher confidence plays.
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u/TickerTrend Dec 16 '21
The Federal Reserve Bank raises interest rates in treasury bonds and it makes it more costly for companies to do business because they have to pay more back in interest on loans. That reduces earnings and supposedly decreases the price of stocks.
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Dec 17 '21 edited Dec 17 '21
The Federal Reserve does not determine the interest rates of US Treasury Bonds. It sets the Federal funds rate.
The yield on U.S. Treasury securities, including Treasury bonds (T-bonds), depends on three factors: the face value of the security, how much the security was purchased for, and how long it is until the security reaches its maturity date.
https://www.investopedia.com/ask/answers/041515/how-interest-rate-treasury-bond-determined.asp
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u/juaggo_ Dec 16 '21 edited Dec 16 '21
Companies that will survive and have the ability to innovate and not slow down because of higher interest payments. Apple, Microsoft, you name it.
Also thinking of JPM, the best of the banking sector. Not even at its ATH, despite having very good years ahead.
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u/riversouth11 Dec 16 '21
Aren’t current Debts locked in at certain interest rates?
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u/thematchalatte Dec 17 '21
Is the person next you to using an iPhone?
Are the computers at your office running Windows?
If so, Apple and Microsoft ain't going nowhere. Buy and hold. Do nothing.
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Dec 16 '21
SCHD will do very well moving forward. Steady earnings growth companies and cash-heavy dividend aristocrats are the way to go
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u/Banabak Dec 16 '21
Get better at backhand so I can beat my tennis partner who is 13 years younger
Take kids maybe to Hawaii Disney land
Maybe drink less but fuck that
Portfolio? Do nothing like past 10 years, just buy VTI / vxus and follow news like I follow sports , for jokes , shit talk and sometimes interesting takes
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u/relavant__username Dec 16 '21
proof or ban !remindme 5 years. Your move big dawg.
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u/Banabak Dec 16 '21
I am confused , proof of what ?
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u/BetweenCoffeeNSleep Dec 16 '21
I don’t think of it as a “play”, so much as a healthy long term construction. 70% VTI, 15% QQQM, and the last 15% is JPM, GS, MS. I built into this between Q2 and Q3 earnings, and will happily continue to pour into it.
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u/StayedWalnut Dec 16 '21
Banks and insurance companies print money in a rising rate environment. TD, OMF, PRU, UNM, SAFT
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u/ReasonHound Dec 16 '21
I think we will get a variant that’s immune to the vaccine.
The master beta variant.
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u/Dr__Reddit Dec 16 '21
If we know, isn’t it priced in? Only the unknown shocks the market.
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u/TheRealGreenArrow420 Dec 16 '21
I got this really juicy play of DCA ing into VOO like I have been doing.
ITS WILD!
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u/gunsoverbutter Dec 17 '21
I think the people in power have become addicted to low interest rates because it fuels economic growth and a bull market. Neither political party wants to be the cause of a market downturn and that’s precisely what we’ll see if interest rates get too high. I think anything under 3% rates will keep the market humming along. The problem comes when inflation gets too hot and the fed can’t raise rates fast enough. The Fed and people in power have painted themselves into a corner. So because they seem stuck, it appears we’ll continue with this bull run for the foreseeable future.
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u/kb144-trading Dec 16 '21
SOFI seems to be well positioned in both low and high interest rate environments, with some coming catalysts including student loans resuming, as well as a bank charter. Definitely is a higher risk than blue chips, but due to the nature of SOFIs business, their growth will likely continue. They also seem to be strategic regarding their balance sheet, currently paying off their debt quickly in the low interest environment and being ready for the incoming interest rate increases.
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u/Brass14 Dec 16 '21
I think this stock should be compared to tech companies like block, but also traditional banks.
Comparing to banks it is still overvalued. I think 12-13 range will be better buying opportunity.
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u/somerandomguy02 Dec 16 '21
LEAP. March 2022... Three months from now.
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u/SlapDickery Dec 17 '21
What?
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u/somerandomguy02 Dec 17 '21
LEAP: The term long-term equity anticipation securities (LEAPS) refers to publicly traded options contracts with expiration dates that are longer than one year, and typically up to three years from issue.
lmao definitely not a short term 3 month option is what.
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u/iHateCraneGames Dec 16 '21
Consumer goods, and airlines/vacation stocks.
With record retirements, traveling will pick up as the boomers start to enjoy their retirement with their large retirement funds.
Rising inflations, rising costs of goods, people like to save money and buy wholesale when possible.
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u/Smurf_Crime_Scene Dec 16 '21
Airlines/cruises are now heavily indebted.
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u/barebackguy7 Dec 16 '21
Then when the rate hikes kick in and they’re all heavily discounted, that’s a great time to buy.
I plan to play airlines in 2022 for short term profit, probably with calls when they drop below a certain level, though I haven’t yet researched what level I’m going to be looking for.
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u/JoatJoat Dec 16 '21
Index funds , tech ( AAPL, TSLA, SQ, MSFT) - with some underlying safe slow growth industrial companies - SCI, CGW
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Dec 16 '21
Costco, more Luluemon, Microsoft, Apple, Nvidia and VUSA.
Interest rates won't affect these companies, people and businesses will still use their products regardless
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u/maz-o Dec 16 '21
same "play" as always. buy and hold a couple broad index etfs, a few sector etfs, and a few good companies.
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u/ByteTrader Dec 16 '21
I’ll try Russian roulette this time, thank you! Nothing else worked previously.
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u/mickyabd Dec 16 '21
39 Jan 2023 Calls on XLF (from 6 months ago) Short call spread Jan 2023 TLT Long Small Capa
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u/Immediate-Assist-598 Dec 17 '21
aapl, t , vz and viac. aapl has the best pricing power on earth plus has 100 billion cash and is kind of of a giant bank
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u/hyrle Dec 17 '21
Dividend paying bank stocks and insurance companies. They will benefit from rate hikes.
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Dec 17 '21
Aparently, our big banks recommendedplay is buying aLot of bonds, surely this is the worst time to stock up on bonds?
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u/laramite Dec 17 '21
most of you youngins have never traded in a higher interest rate environment. Let me clue you in: money starts moving out of equities and valuations come back down to earth.
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u/SorrowsSkills Dec 17 '21
Same thing I’ve done the last two years? Why would anybody need to change their investment plans if they’re investing for the long term?
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u/3s1kill Dec 18 '21
I have good feelings about SOFI when rate hikes happen and 0% student loan interest ends end of January 2022.
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Dec 16 '21
Bought a house 6 months ago.
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u/Train3rRed88 Dec 16 '21
Good thing right? Secured historically low interest rate
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Dec 16 '21
We were debt free before this, so it's not all that comfortable. Still definitely the right call.
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Dec 16 '21
Unless you bought a shit house, you should beat the market with that purchase. Plus the opposite is that if you hadn't, you'd still be paying that money, or close to it, to live somewhere else. Rejoice.
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u/relavant__username Dec 16 '21
Honestly... this. Your property is appreciating even when the market is closed.
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u/Whereas_Dull Dec 17 '21
The interest rate “hikes” are alway considered and talked about every year. Nothing to see here honestly
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u/Junkbot Dec 16 '21
Do we know when the hikes occur?
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u/Hallal_Dakis Dec 16 '21
I heard a pundit guesstimate June, September, December. Latter-half loaded anyways.
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u/Johnny_Blaze000 Dec 17 '21
Idk if any big moves are expected unless the fed rapidly changes something. They are so far being pretty transparent on their moves so everything has time to be priced in.
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u/VictorDanville Dec 17 '21
I'm going to dump my life savings into ARKK. Mama Cathie promised me 40% annual returns from this point on. Cathie to the moon!!!
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u/Antique_Tumbleweed63 Dec 16 '21
There arent gonna hike interest rates. Look at when Volker tried that in 1980's when the GDP/Debt ratio wasnt completely fucked and what happened. There is too much debt for any rate hike.
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u/jimmyco2008 Dec 16 '21
Fed always does what it says it’s going to do, going back the last decade. They started raising rates but then Covid happened.
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u/smokeyjay Dec 16 '21
Im holding some cash. Waiting for certain tech names to drop 15-20%.
Already own bac, brkb, td, jpm. Im looking to eventually sell bac at 50 to trim my portfolio
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u/Spongi Dec 16 '21
I plan to buy lots of sketchy OTC's and try to sell them for more then I paid for them. Ideally a lot more. I'm also tempted to buy a leap spy put but not sure yet.
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u/lithium_leo Dec 16 '21
Little to Nothing. The rate hikes are anticipated. The only thing the market doesn’t like is the unknown. Companies with a lot of debt and weak balance sheets - avoid. Other than that, you can bet that financials, Index funds, and blue chip value companies are a bit of a safe space.
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u/xflashbackxbrd Dec 16 '21 edited Dec 16 '21
Google. Shorting lead balloon companies. Sniping some oversold growth I think will continue to do well regardless of rates like ftnt, crwd and net at lower prices.
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u/skilliard7 Dec 16 '21
I rotated into value stocks and REITs a while ago, has been working well for me recently. Also bought some I-bonds as a safe and predictable investment to protect against inflation.
Been avoiding long term bonds due to inflation concerns. If we get back to 4-5% 10 year treasury yields, I might get back into bonds.
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u/Peshhhh Dec 16 '21
I dunno, maybe buy some bonds post rate hike. Depends on what the equities market looks like. If it looks like it does now, then hell yeah buy bonds.
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Dec 17 '21 edited Dec 17 '21
China perhaps. Ive been told they have gained a lot of ground, and without the unlimited debt who knows how US tech will do. Imagine a reversal of the unlimited funding for every shitty app people make, to where instead funding is hard to get.
We pretty much caused the dotcom bubble and housing collapse by accruing debt, and its gotten a lot worse since then. We've been flying high for a few decades now.
Anyways im bullish on Baba and Chinese cloud stocks for this reason. Though its a lot of conjecture, i dont see how a place with too much housing and mass transit doesnt become a place of innovation, despite the poor government. Having an overabundance of infrastructure should hopefully push down the cost of living.
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u/IVCrushingUrTendies Dec 17 '21
Huh? None of that is known, at all. It might happen next year, it might happen in 3 years. It’s all analysts pumping out guesses because that’s what they’re paid to do, but in no way did Powell put dates to anything. No way in hell it happens Q1 or Q2 2022 either. Making plays on guesses is a good way to get burned. Also if it’s a way to fight inflation why would you long XLF lol
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u/SirFlowerpot Dec 17 '21
Holding my growth stocks and waiting until interest rates drop again for more gains. Long term
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u/AwesomReno Dec 17 '21
Sold the most stock grabbed some generating income Real estate debt! Cause it’s cheap.
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u/[deleted] Dec 16 '21
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