Most economists now agree that the Federal Reserve will raise rates next month, marking a historic end to cheap money.
That should be good for these three stocks.
Though most fear the hike, and the volatility that comes with it, it trumps letting inflation take hold and ruin the purchasing power of the dollar.
Rates have been so low—near zero—since 2008, so the hike will likely be small.
The Fed wants to tap the breaks, not mash them…
As an investor, there are a few ways you can capitalize on the hike, which will likely come at the Fed’s next meeting in December.
What does the hike mean? Well, for one, money will get more expensive.
Take a look at the bank stocks you have in your portfolio, and more importantly, those that deal with credit cards.
One estimate says that if the rate rises just a tad, consumers would be on the hook for an extra $2 billion in credit card payments.
Credit card stocks have been flying under the radar for some time despite posting big gains, because, again, money is cheap. Nobody in the business makes big money when the prime rate is low.
When it comes to credit cards, however, analysts are looking at the fundamentals, not necessarily the rate hike. But Morgan Stanley is calling DFS a top pick for cards right now.
When it comes to Visa, it’s in an entirely different position…
The company recently announced that it’s buying Visa Europe, a company that it spun off years ago, for $24 billion.
The stock, however, is near its five-year high and is worth a look. Its recent earnings report showed $1.5 billion in profits—a number that is likely to go up as the cost of money does, too.
MasterCard, too, is near its five-year high. It’s pricey, but if you believe analysts, its price at near $100 is still five percent too low.