What Sectors Could Benefit From An Interest Rate Hike?

There has been a lot of attention focused on when – or if – the Fed is going to raise interest rates. This Friday before the markets open we will get the nonfarm payroll numbers for August. If those numbers are strong the Fed may decide to raise rates sooner versus later, meaning they would vote to raise them at the September meeting instead of the December meeting.

If you look at the SPX for the last 38 trading days, it looks as if it is paralyzed and waiting for an announcement to move it one way or the other.

SPX Daily

The banking sector is one that could benefit from higher interest rates. XLF is an ETF that tracks the financial sector. As you can see in the photo below, it has already broken above the 24 price resistance level and could continue up if the Fed does actually raise interest rates. If you are more aggressive, you could also look at FAS, a 3X leveraged ETF. Just remember it will move three times as fast in BOTH directions.


You can now take this to the next level, by looking at the top 10 components of XLF and just trade the best performers. The top 10 percentage holdings are below.

Holdings Chart

One example is Bank of America (BAC). It is up 5.9% after breaking out above resistance and XLF is up 1.4% after breaking out above its resistance. Below is a chart of BAC so you can compare price movement on BAC, XLF and SPX over the past 38 days.


I hope this helps.

Simpler is Better,


Tucker Stipe

Tucker Stipe Content Provider

Throughout his career, Tucker Stipe has demonstrated the ability to adapt and change, from engineer, to sales management, to business owner. From 2009 to 2015, Tucker was Head Coach and Trainer for ETF Trend Trading. His passion is trading and helping others learn to trade.

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