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Goldman Sachs’ Advice On Investing In a High Interest Rate Environment

The Goldman Sachs logo is displayed on a post above the floor of the New York Stock Exchange

While there is disagreement on how soon the Fed will send interest rates higher, there is one thing that is certain; no matter when it will happen, it will happen, and probably sometime in 2015. Goldman Sachs analysts, as reported by CNBC, recommends investors look at stocks that tend to be bought and held for a long time. According to the investment bank’s data, stocks that have less turnover tend to perform better in low interest rate environments.

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Since volatility is lower in these stocks, there is less risk involved when the financial horizon changes. CNBC thinks the rates will rise in the summer, although it might be just 1% and is unlikely to be a radical change. Lower oil prices and a 5% growth in the GDP recently, higher interest rates are coming. In addition, wages are likely to rise “meaningfully.” These factors will encourage the Fed to reverse the trend of super-low interest rates.

Goldman points out that over the last 20 years, low turnover stocks outperformed by an average of 8% in periods of rising interest rates. Stocks like Berkshire Hathaway, Seaboard and Cantel Medical are examples of stocks investors like to hold on to.



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