While there are a lot of doomsayers out there touting the fact that our economy is tanking, optimists see an exciting new opportunity.

I can’t stand Negative Nellies…

“Life’s too short to be unhappy,” that’s my mantra. 

Sure, everybody has bouts of pessimism, but it’s the people that dwell there that really rub me the wrong way. 

Your average Negative Nancies, Debby Downers, and other depressing alliterative names never have anything positive to say. It’s always one calamity or another–and if calamity isn’t befalling them now, one is about to. 

I can’t live like that. I have to have hope. 

Now, I can understand how that may confuse some of you Money Movers because I’ve been talking a LOT about the impending bear market, the current economic hardships, and the problems plaguing the global market. Hardly a positive outlook.

But that’s not because I’m being pessimistic. I focus on these things because I don’t want our readers getting caught with their pants down. 

That’s not pessimism…that’s prudence. 

One of my more endearing traits (or annoying, depending on how you look at it) is the fact that I try to look for the silver lining in all situations…and contrary to what you might think, there is actually a lot of silver surrounding the imminent economic downturn. 

Silver Lining To Rate Hikes? New Opportunities…

Now, what tends to happen in a bear market is pretty cut and dry. History shows us what to expect. 

Inflation soars, the Fed raises rates, prices begin to stabilize, growth lowers, the Fed started lowering rates to promote growth, high-growth returns, and we’re back on the bull.

Wash, rinse, repeat. 

The Fed has been very vocal about hiking up interest rates, and as of yesterday’s meeting, it looks like March is when we’ll see them make the first move.

And when that happens, those high-growth speculative stocks tend to take a backseat to more asset-driven investments that have something tangible in which investors can put their faith. 

It’s been that way of it since the dawn of the stock market.

So, in the spirit of being optimistic about the coming downturn, let’s take a look at some of the markets that are bound to get a boost from the elevated interest rates. These could give us a few opportunities to thrive when the many are trying to hold onto every dollar they get. 

It’s important to keep in mind that the Fed has had eight “hiking cycles” since 1975, and examining the way stocks have responded during each of these cycles gives us a glimpse of what to expect this year.

If historical data is accurate, you may want to start looking at Europe…

Historically, European stocks have delivered returns while the Fed hikes rates, most notably during the first six months after the first hike, during which these stocks tend to jump 9% on average during that period.

Now, American stocks don’t do too bad either, but the fact is that European stocks tend to trade at a 27% discount to their American counterparts, which is too much of a discount to ignore.

The next market? Value stocks. 

With the implementation of rate hikes, the effect tends to close the gap in returns between the riskiest and least risky assets out there. Investors may sell off their riskier and most expensive stocks (which tend to be growth stocks in the tech sector) and buy into the “safer bets” that are offering higher returns.

Obviously, the hard part is finding those undervalued stocks–but it’s not as hard as you may think. 

Ditch The Growth, Look For Assets

Lastly, we’re going to look into asset stocks.

Energy, real estate, and basic resources are traditionally the best sectors to be in when the Fed hikes–but there are a few pitfalls you may want to avoid. 

For now, you may want to hold off on grabbing any defensive sectors like utilities, telecoms, and consumer goods, especially with the pandemic still exacerbating supply chain issues.

You may also want to avoid financials too, as this sector has underperformed more than any of its defensive cousins. 

That’s because the gap between short-term US government bond yields and long-term yields usually narrows during hiking cycles, making it harder for banks to earn a profit….

But that may be more of a short-term view. These defensive sectors could still be ripe with profits, especially in Europe, as the region’s interest rates are currently negative. Any rise could be positive for banks’ earnings. 

We’ll just simply have to keep our eyes on it. 

Now, all that being said, I hope the takeaway from this is that we don’t need to be pessimistic during a bear market or economic downturn.

We merely need to shift our focus from short- to long-term assets that can at least return us some kind of profit rather than a high-growth stock that yo-yos and plays with our emotions. 

We’ve been the hare for so long that we’re scared to become the turtle.

But turtles live rich, fulfilling, LONG lives–and who doesn’t want to do that?

“A paradigm shift, where, in addition to physical inputs for farming, a focused emphasis placed on knowledge inputs can be a promising way forward. This knowledge-based approach will bring immense returns, particularly in rain fed and dry land farming areas.” – Pratibha Patil