Popular Sector ETFs to Watch When Rates Rise

On the other hand, the bond-proxy utilities sector, along with health care, have been among the worst off segments when rates rise.

Interest Rates Push Higher

With strong data like a historically low unemployment and expanding corporate profits bolstering the economic outlook, interest rates have pushed higher in the past few weeks. The government revealed the unemployment rate slipped to 3.7%, a level not seen in nearly half a century. Additionally, average hourly earnings rose 8 cents or 0.3% in the past the month, matching August’s gain and hinting at rising inflation.

In response to the promising economic data, the Federal Reserve has justified its third quarter-point rate hike in September and issued plans to continue to gradually raise interest rates if the economy sustains its current pace. The central bank also upwardly revised economic growth this year to 3.1%, citing manageable inflation and an unemployment rate of 3.9%.

Fed Chair Jerome Powell also recently stated that the central bank is “a long way” from a neutral level of interest rates, suggesting more hikes are on the way.

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