5 High Dividend Stocks To Bet Against A Rate Hike

Concerns over declining oil prices, slowdown in the Chinese economy and uncertainty over the Presidential Election have been dominating the stock markets recently. However, improved labor market conditions and an almost desirable inflation rate make it favorable for the Fed to raise interest rates.

Janet Yellen’s much anticipated speech at the recent Jackson Hole symposium signals a possible rate hike in “recent months.” But the fact that rates will not be increased until the Election makes December a strong contender for the month of the hike.

However, a near-term rate hike speculation strengthened the dollar. This, along with galloping crude production in the Middle East, sent oil prices spiraling down on Monday. The oil minister of Iraq remarked that the country would continue to ramp up its output, pushing Brent crude down by 1.32% to settle at $49.26 a barrel, offsetting reports of an inventory drawdown at Cushing, OK.

Moreover, while the domestic economy is showing signs of steady recovery, global growth concerns are yet to alleviate. Sluggish growth in the world’s second-largest economy – China – has become a major drag on global growth. This month, the top 500 Chinese companies reported a combined revenue decline over the past 15 years, with many of them operating in the industries like coal, steel, oil and chemicals, all of which have been reeling under the impact of overcapacity. Meanwhile, European banks are still struggling due to lingering bad loans and low overall profits. On the other hand, as the Brexit episode is slowly taking a toll on the U.S. economy, the Fed plans to cope with this crisis before making an aggressive move such as a rate hike.

Back home, second-quarter GDP data, touted as the biggest economic release of the month, lagged expectations. The "second" estimate by the Bureau of Economic Analysis indicated 1.1% growth in GDP in the second quarter, down a tenth of a percent from the initial projection. Although growth in GDP remains sluggish, it is expected to pick up pace in the second half of the year. For now, investors anxiously await the release of unemployment data this week, as it is a major determinant of the rate hike.

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