With the recent news that the US Fed raised interest rates by 50 basis points, investors may still wish to include inflation protection in their portfolios particularly in their stocks investment even when inflation appears to be peaking, and may even be starting to head downward.
After all, inflation has an impact on wealth erosion, eating away at investment returns. With the current turbulent markets, here are this week’s Hottest Stocks to Watch, companies to help ride out this high inflationary climate.
Affirm Holdings (NASDAQ: AFRM)
Buy Now, Pay Later: when rising interest rates make family finances more constrained.
The terrible reality for households living barely within their means is that rising mortgage payments might be enough to push their spending over their income, putting more pressure on household budgets.
Affirm Holdings is a fintech startup that offers assistance to struggling families by giving them flexibility in how they pay for some purchases.
Customers can choose a bi-weekly payment structure for smaller items or a monthly payment plan for big-ticket items, which can help ease the pressure on household spending brought on by rising interest rates. This option is available for everything from clothing, furniture, personal care products, and automotive servicing.
Affirm’s transactions per active user jumped 31% in the most recent quarter as interest rates soared, and repeat customers accounted for 85% of all transactions in the fourth quarter, which may be a sign that customers are turning to Affirm when the going gets rough.
Affirm is a stock that was heavily shorted by active traders, resulting in the share price dropping significantly this year, likely due to its highly contentious business approach, which is heavily fee-driven, with about 60% of its sales falling under this category and also due to its doubtful financial reporting.
High-growth stocks like Affirm, which were the first to decline in the current bear market, appear to have stopped declining and reached a bottom, despite the fact that several of them fell by more than 60%–70%, offering attractive entry price points for new investors looking on the long term.
With that said, Affirm is very compelling and is definitely in my buying window. Any further declines in price would just make this scream even more in value.
Related Article To Read: 3 High-Rated Stocks That Could Shine in 2023
Zillow Group (NASDAQ: ZG)
Rates that affect property prices might cause a rise in listings.
The stock has experienced quite an adventure. First, after leaving the iBuying company, its stock collapsed. It then crashed once again along with the larger tech crash.
It is crucial to keep in mind the long-term investment thesis despite dropping stock prices: Z continues to be positioned as a leading online real estate platform, despite the fact that it will no longer be actively involved in real estate transactions.
Even if management falls short of its 2025 projections, the stock still has a sizable upside, making it an ideal long-term investment.
Since Zillow is an online real estate marketplace, the number of properties listed on the website directly affects its income stream. Due to the inverse connection between interest rates and property values, an increase in interest rates should result in a decrease in property values.
With these developments, homeowners and real estate investors may finally take advantage of the enormous increase in property value over the past several years and try to sell their properties before prices fall, increasing the number of listings on Zillow.
While the stock price for Zillow has gone up since its October lows, it still offers an attractive value proposition for me, and wouldn’t mind scooping shares at these levels.
Related Article To Read: Stocks to Keep an Eye On in 2023
JPMorgan Chase (NYSE: JPM)
This bank can earn more interest income amid rising rates.
Over the past ten years, numerous financial sector businesses have suffered from persistently low-interest rates.
Companies like JPMorgan, other banks, and life insurers had their earnings pinched as rates remained around all-time lows for a lengthy period of time.
This is because a lot of these businesses rely on interest rates for a portion of their revenue and with high-interest rates looking likely to extend further into the horizon, financial sector stocks like JPMorgan may prove to be wise investments in this kind of environment.
Higher interest rates are typically welcomed by most bank stocks as long as they are implemented gradually.
Banks often profit from the spread, which is the discrepancy between interest revenue from loans they issue and interest expenditure on deposits used to support those loans.
This variation, also known as the net interest margin, tends to climb with rising interest rates and reduce with falling rates.
Banks benefit greatly from high-interest rates, but there may be a downside. Banks may have trouble finding borrowers prepared to pay much higher rates if rates climb too fast.
In addition, banks could be less eager to lend money to certain borrowers if the economy slows down as a result of the higher rates due to worries about increased default risks.
Banks would want interest rates to stay higher for longer, despite the short-term danger associated with higher rates, since it will ultimately increase the spread they receive on interest, boosting profits.
With these things in mind, holding JPMorgan can be a part of a well-balanced portfolio, if interest rates continue to rise.
Quite significantly up since the September troughs, any declines for this stock will just make it more attractive in my watchlist, and more opportunities for entry.
When investing in the stock market, you must exercise care when trying to make purchases in these tricky market conditions.
Be aware that for the majority of investors, timing the market is a bad idea.
However, you can still use some of these three stock ideas when building your portfolio to help you diversify, and ride out this interest rate-caused bear market.
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