Consider These Three Stocks When Rates Rise

By Joyce Yu

Rising treasury yield has been one of the reasons that many investors blame for sending the U.S. stocks on a roller coaster ride lately. However not all stocks suffer when rates rise – Goldman Sachs, Microsoft and Visa could be profitable, according to historical data. Analytical result from Kensho, a hedge fund analytics tool, shows, these three stocks returned at least 12.1% on average during a three-month period when rates are surging.

Interest rates have continued to soar recently, with the benchmark U.S. 10-year Treasury note yield breaking a new high of over 3.1% on Wednesday for the first time since 2011. Investors fear that rising inflation could lead the Federal Reserve to tighten monetary policy faster than the market is expecting, and are thus very careful in stock picking. Besides the stocks mentioned earlier, Apple and J.P. Morgan Chase are also big winners when rates surge, averaging returns of 11.8% and 10.9 % in three months, respectively.

Walmart, which averages a slight return of 0.3%, seems to be a safe bet too. The company said on Thursday that its digital sales jumped 33% last quarter, easing concerns that the world’s largest brick-and-mortar retailer is struggling to get ready for the digital era. Walmart expects digital sales to increase 40% for the entire year, and is sparing no efforts to appeal to younger, wealthier Americans.

“We are changing from within to be faster and more digital, while shaping our portfolio of businesses for the future,” McMillon said in a news release Thursday. Over the past two years, the company has gone on a shopping spree to acquire niche retailers such as ModCloth, Bonobos, Moosejaw and Hayneedle in order to strengthen its presence in the digital world. Yesterday, it announced a partnership with fashion chain Lord & Taylor for a landing page on the website.

“Today’s results are proof not only that Walmart is making gains in its day-to-day business, but that it is now a company firmly in the midst of a dramatic transition,” Neil Saunders, managing director of GlobalData Retail, wrote in an email.

Walmart currently has 4,760 stores that have been open for at least a year throughout the U.S.. Sales of these stores rose 2.1% and foot traffic was up 0.8%, indicating that shoppers continue to head to Walmart’s stores. Its extensive store network, which the company says are within 10 miles of 90% of Americans, offers customers curbside pick-ups or pick-up in store, in addition to buy online which has pushed up shipping cost that eats into Walmart’s profit. Walmart’s profit in the United States fell 3.1% from a year ago.

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