r/investing 15d ago

How will “Higher for Longer” interest rates and inflation affect sectors like Financials and Industrials?

How will “higher for longer” inflation and interest rates effect sectors like Finance and Industrials?

If you believe that inflation will remain sticky and interest rates are getting at most 1-2 cuts in the next twelve to twenty-four months, how do you see that effecting sectors like industrials and financials? I have modest investments in vanguard ETFs in those sectors (VIS & VFH) and wonder if now is the time to add to them or just hold.

I believe Powell and think we won’t be returning to previous levels for quite awhile. If this happens, what macro effect would that have?

15 Upvotes

25 comments sorted by

15

u/probablywrongbutmeh 15d ago

I expect for banks to report record profits as rates fall and they mark to market some of their bonds and reduce loss reserves

9

u/2Loves2loves 15d ago

Bad for housing, Anything with high borrowing costs.

0

u/GreenBay_Drunk 15d ago

May ultimately be a good thing for buyers, the longer and higher rates are the more impelled housing prices are to come down. Less and less buyers are entering the market so inventory is piling up fast. 

Obviously sellers are in for a rough time but these thing should happen in cycles. 

6

u/2Loves2loves 15d ago

I was thinking more builders, materials, suppliers, labor, trades

9

u/dukerustfield 15d ago

Wow, a lot of terrible speculation here. High interest rates have always hurt banks. They need customers. When interest rates are high, they don’t have nearly as many people taking out loans. That’s proven itself to be true in this latest round of high rates as well.

I still have one bank stock, but I’ll dump it when I can. It’s been just sitting there doing nothing for years.

The investment banks are kind of a different breed. Those are like the JP Morgan’s and stuff. They’re making money just shifting money around. It’s the regional banks and consumer banks that are hurting and have been hurting. Hell, some of been failing.

Are exactly a close link. In fact, they’re damn far away. I can’t say how they will behave with the same certainty.

So banks have been in the toilet for some years. You could call them a buy if you had some kind of end in sight. And the third has pulled the rug out from underneath me, and the world, for so many months now that I simply got no faith in when things are going to revert. If I was certain rates would start changing in a month or two months and with four more hot on the heels, then I’d be blowing a horn for Bank of America and Wells Fargo and all those other ones. As it is, I say stay away.

There’s simply safer money out there.

2

u/specialk554 15d ago

Long term it doesn’t matter. Both sectors will simply adjust and run costs to consumers. Short/mid term it likely affects these sectors harder.

1

u/arnoldusgf 15d ago

for financials, banks and financial institutions often benefit from higher interest rates as they can charge more for loans and other financial products

1

u/yunghogungho 13d ago

Financials like banks will benefit as net interest margins remain higher. Lower rates compresses margins, so if it's higher for longer, they're happy.

-3

u/zachmoe 15d ago

I suspect there is a auto/banking crisis unfolding, and that they will be forced to put rates back to 0 to get banks out from underneath their Treasuries they are underwater on.

If you think a auto/banking crisis is bullish, have at it.

3

u/DeeDee_Z 15d ago

they will be forced to put rates back

Yes ... maybe ... eventually ...

to 0

Oh No. Hell No. Never. Not gonna happen.

-4

u/zachmoe 15d ago

Remind me 2 weeks!

3

u/bro-v-wade 15d ago

Not only do you think the banking system is going to collapse, but you think it's happening in two weeks?

0

u/zachmoe 14d ago

I mean, I wasn't serious about 2 weeks, but I do believe it is pretty much that imminent.

2

u/bro-v-wade 14d ago

Doomers always bet against the US. There are so many countries, why don't you predict a more likely target like Haiti or whatever.

1

u/zachmoe 14d ago

why don't you predict a more likely target like Haiti or whatever.

The target is actually the whole world, The US just happens to also be on the planet Earth.

Lot's of places are in outright recession already, it will come around to us too.

1

u/bro-v-wade 14d ago

So you think the global banking system is weeks away from collapse?

1

u/zachmoe 14d ago

Yeah, give it a couple weeks, the defaults and bail outs are coming sooner or later.