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FEATURED VIDEO
Four mutual funds to consider if interest rates rise are the Fidelity Select Construction and Housing Portfolio, Fidelity Select Banking Portfolio, Rydex Retailing Fund and ProFunds Short Precious Metals Fund. Interest rates typically rise due to central bank hikes when it becomes concerned about inflationary pressures.
However, recent global trends make inflation unlikely. Economies around the world – specifically in Europe and Japan – remain crippled by a lack of demand. Governments are unwilling to deploy fiscal policy to generate demand due to concern about debt and deficits. Most countries continue to struggle with deflation rather than inflation. In addition to weak demand, which leads to lower prices, there is a staggering excess of labor. When the supply of labor is plentiful, inflation is transitory, as there is no feedback loop between wages and prices.
Due to the global nature of the economy, this deflation has been exported. Since the Great Recession, any uptick in inflation in the United States has been temporary despite years of growth. Any interest rate rises are due to central banks seeking to normalize monetary policy to have tools for the next downturn. Of course, this action communicates that the economy is strong enough to stand on its own without monetary support. It is also evidence that certain sectors of the economy are doing well, such as housing, labor, banking, insurance and consumer spending, which are integral to the economy.
FIDELITY SELECT CONSTRUCTION AND HOUSING PORTFOLIO
The Fidelity Select Construction and Housing Portfolio mutual fund is composed of high-quality stocks that are in or related to the construction and housing sector. Housing is an integral part of the economy, and it was badly damaged due to the bubble from 2003-2006. One reason the Federal Reserve kept interest rates low was to