History shows that industrial stocks tend to underperform the market in a rising interest rate environment. These companies rely on their healthy capital expenditure (capex) spending, which typically comes in the form of the goods and services that industrial companies produce. When those consumers cut their spending, industrial companies are affected almost immediately.
But in 2022 and 2023, even as interest rates rose at the fastest rate ever, many industrial companies got a boost from the Inflation Reduction Act and the Infrastructure Act that pumped trillions of dollars into the economy.
That money had to go somewhere, and initially, it went to the companies that provided the equipment needed to repair and replace roads and bridges and to those who built data centers.
But 2024 has been a different story for the sector. Many outperforming stocks are now the market laggards. However, with Federal Reserve chair Jerome Powell all but assuring the market that interest rate cuts are on the way for the first time since 2019, industrial spending should pick up.
That means it's time to rotate into industrial stocks, many of which offer safe, growing dividends to boost an investor's total return.
Click the "Continue to Slide #1" button to view the first company.
