Stocks that will do well with higher interest rates and tighter money

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What you need to know to find winners as costs rise while demand for goods and services slows.

Attention turns to capital allocation decisions within companies given the repricing of the cost of capital.Many companies took a potentially costly path towards improving their technology, yet have little to show for it. Those that can convince investors their capital does provide a return above the repriced cost of capital should find favour.The start of a rate rise cycle has crystallised the potential for a very different leadership in equities.

Those who lean to low-cost options may wish to consider other ETF pathways – for example, giving equal weight to mid-cap indices, quality screens or select thematic funds. The last has head-spinning investment implications in potential spending on anything from restructuring electricity grids to recharging stations and batteries. These are complex areas that require specialist knowledge to judge the technology and how it should be valued. Pay attention to valuation alongside the theme.

 

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