This is how investors can prepare for the upcoming rate hikes
- The U.S. Federal Reserve is now expected to start raising rates as early as March.
- Lori Calvasina sees energy and financials as good bets in such an environment.
- The RBC Capital Markets' expert is bullish on small caps for 2022.
The U.S. Federal Reserve is now expected to start raising rates as early as March, and RBC Capital Markets’ Lori Calvasina says Energy and Financials could be promising bets in such an environment.
Energy and financials are still cheap
Both energy and financials had a good run in 2021, but Calvasina still sees the two sectors as inexpensive with further upside this year. On CNBC’s “Worldwide Exchange”, she said:
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Financials and Energy is doing so well to start the year as they’re populating the cheapest stocks in the market right now. Both are still inexpensive, and there’s still value there. As long as the valuation opportunity is still in place, those are good areas to look at in 2022.
Considering inflationary pressures, Calvasina says technology is only suitable for long-term investors at this point in time. Near to intermediate-term investors, she added, should focus on cheap stocks in 2022 that also include Consumer Staples and Materials.
Calvasina is bullish on small caps
According to Calvasina, small caps in general could be a great pick for 2022 as long as the Omicron variant of the Coronavirus doesn’t pose a serious threat to the U.S. economy. She added:
Small caps are deeply undervalued relative to large caps. So, if you’re feeling good about the economic backdrop, that’s another area that’s been ignored for the past few years where you can find some interesting valuation opportunity, including in financials and consumer stocks.
Calvasina expects the 10-year yield to climb to 2.2% later this year that gives enough leeway to the financial stocks. She, however, clarified that it’s a trade that’s only applicable as long as the 10-year yield is rising, after which, valuations will cease to be as exciting for financials.