BoE hints at raising interest rates in Dec. Which stocks to buy?

Highlights

  • BoE hints a looming hike in interest rates in December.
  • Current inflationary trend is due to external factors. However, labour market uncertainty is a critical factor.
  • With the current inflation at 4.2%, the BoE expects the inflation rate to peak at 5% next year, which is way above its 2% level.

The Bank of England has been dropping subtle hints to convey about a looming rate hike and thus an increase in interest rates seems inevitable. Jonathan Haskel, an external member of MPC, has said that BoE may hike interest rates as the country is recovering from pandemic declines. Even thought the current inflationary trend is due to external factors, like the soaring energy prices, the labour market is still a critical factor. The bank rate is bound to go up if the labour market stays tight with high demand, as per Haskel.

Due to the labour market uncertainty being considered as a critical factor, the BoE kept the interest rates hike on hold, contrary to the expectation of a hike earlier this month from the current record low of 0.1%. However, the stance has now changed as per the latest data that suggests of labour market buoyancy. With the current inflation at 4.2%, the BoE expects the inflation rate to peak at 5% next year, which is way above its 2% target. Thus, a green light has been given to a hike in interest rates in December amid record inflationary pressures, a buoyant labour market and business growth.

RELATED READ: How soaring inflation might sway interest rates

Typically, some sectors benefit more than other when interest rates rise as they are more sensitive to changes in rates and thus have a higher impact on their profit margins. Some of these include the financial sector, retail sector, and health care.

Let’s take a look at some of the stocks you can lap up as the interest rates rise.

Lloyds Banking Group PLC (LON: LLOY)

Lloyds Banking Group PLC’s current market cap is £35,310.81 million. It has given a return of 33.97% in last 12 months, and its YTD return is 36.76% as of 23 November. The group’s shares were trading at GBX 49.84 as of 23 November 2021 (GMT).

HSBC Holdings plc (LON: HSBA)

Global investment major HSBC Holdings plc’s current market cap is £90,224.35 million. It has given a return of 15.35% in the last one year and its YTD return is 17.04%as of 23 November. Its shares were trading at GBX 442.95 as of 23 November 2021 (GMT).

RELATED READ: Interest rate hike on the cards: Which banking stocks to buy?

Barclays PLC (LON: BARC)

London-headquartered Barclays PLC’s current mCap is £32,504.75 million. It has given a return of 38.22% in the last one year and its YTD return is 32.11% as of 23 November. Barclays PLC’s shares were trading at GBX 193.78 as of 23 November 2021 (GMT).

GlaxoSmithKline plc (LON: GSK)

UK-based GlaxoSmithKline plc’s current market cap is £77,156.97 million. It has given a return of 12.25% to its shareholders in the last one year and its YTD return is 14.26% as of 23 November. GlaxoSmithKline plc’s shares were trading at GBX 1,533.40 as of 23 November 2021 (GMT).

Next plc (LON: NXT)

UK-based Next plc’s current market cap is £10,883.23 million. It has given a return of 22.62% to its shareholders in the last one year and its YTD return is 15.41% as of 23 November. Its shares were trading at GBX 8,186.00 as of 23 November 2021 (GMT).

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