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Triple Play for Rising Rates

03/31/2015 9:00 am EST


Keith Fitz-Gerald

Chief Investment Strategist, The Money Map Report

If you look at the Fed fund rates dating all the way back to1971, you can see quite clearly that interest rate increases can actually be bullish, explains Keith Fitz-Gerald, editor of Money Morning.

According to my colleague Sid Riggs, the markets actually went up, gaining an average of 13.47% during six of the last seven periods where the Fed raised rates.

The only time the S&P 500 didn't rise alongside rising rates was all the way back in 1970, when the Fed Funds Rate increased from 3.71% to 12.92%. I hardly think the Fed has the gall to jack rates by that much today.

Traders seem to have forgotten that getting the financial house in order is really the great hope here. That means that any panic selling related to rising rates is an opportunity to buy.

I see three great ways to play the last gasps of Fed stimulus and the eventual return to normal rates. The best choices will be our must haves. These are the companies that supply services and products that are indispensable to humanity, and thus are recession-resistant, even immune. Here are three to get you started.

Becton, Dickinson and Co. (BDX)

Becton, Dickenson develops, manufactures, and sells a wide array of medical supplies and devices, instrument systems, diagnostic products, and lab equipment. The majority of its products are single-use only, meaning the company benefits from re-orders on a consistent basis.

It's perfectly positioned behind our Demographics Trend, as the aging global population will create a demand for BDX's healthcare services that is larger than ever. It offers a dividend yield of 1.70%, which is more than reasonable considering the ultra-low level of risk the stock carries.

American Water Works (AWK)

American Water Works provides water and wastewater services to residential, commercial, industrial, and public consumers in both the United States and Canada.

Because everyone relies on running water, AWK makes a perfect must have example, and like BDX, its services will only grow in demand as the world's population continues to grow exponentially (the Demographics Trend at work again). Its dividend yield is currently at 2.40%.

ABB Ltd. (ABB)

ABB is a global leader in power and information technologies with a role in almost every stage of the development, construction, and implementation of projects like smart grid technologies, power grids, and improvements at chemical plants. ABB also offers a healthy yield of 2.80%.

Overall, I know it's tough not to get wrapped up in the moment, especially when markets are getting carried out feet first. But try your best. The point at which the markets reach maximum despondency is almost always the perfect time to buy.

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