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Bank of America (BAC)

Bank of America is a $295 billion financial holding company, with a leading U.S. and global footprint.

Generally speaking, the banking business is positively impacted by rising interest rates. When rates increase, the spread between what banks charge in interest and what they pay out widens.

Bank of America has a high proportion of its assets in low-cost consumer deposits relative to peers. In other words, rising interest rates should benefit Bank of America to a greater degree than many of its competitors. Conservative underwriting and a measured risk-taking appetite should also help the bank take advantage of its scale and opportunities in a responsible way.

The bank is enjoying resilient consumer and strong lending markets. Over the past few quarters, earnings have come in better than expected.

Bank of America shares are down 20% so far in 2022. Rapidly rising rates could serve as a powerful turnaround catalyst.

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Merck (MRK)

Healthcare companies can also serve as a safe haven in a rising rate environment. Their resilient nature makes them relatively immune to the economic turbulence that higher rates can bring.

On top of that, the healthcare sector hasn’t exactly soared in recent years, so valuations are compelling.

Healthcare giant Merck — a $214 billion global healthcare company — represents a solid way to gain access to the sector. It has leading oncology and cardiovascular disease franchises.

2021 was a strong year for Merck. It posted revenue and EPS growth of 17% and 7.3%, respectively, due to strong operational momentum. Currently, the stock offers a dividend yield of 3.2%.

Cheniere Energy (LNG)

Cheniere Energy is the leading producer and exporter of liquefied natural gas in the U.S. Thanks to white-hot inflation, the company is benefiting from soaring natural gas prices. Since interest rates are tied to rising energy prices, Chenier looks like a particularly timely opportunity.

Cheniere is also enjoying a very favorable global supply/demand dynamic, which shows no signs of letting up. Last month, U.S. LNG exports rose 16% to a record high as European countries tried to cut down on Russian gas imports.

Record global LNG demand has resulted in record revenue, volumes and cash flow for Cheniere. The shares are up an impressive 36% in 2022.

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More from MoneyWise

Fine art as an investment

Stocks can be volatile, cryptos make big swings to either side, and even gold is not immune to the market’s ups and downs.

That’s why if you are looking for the ultimate hedge, it could be worthwhile to check out a real, but overlooked asset: fine art.

Contemporary artwork has outperformed the S&P 500 by a commanding 174% over the past 25 years, according to the Citi Global Art Market chart.

And it’s becoming a popular way to diversify because it’s a real physical asset with little correlation to the stock market.

On a scale of -1 to +1, with 0 representing no link at all, Citi found the correlation between contemporary art and the S&P 500 was just 0.12 during the past 25 years.

Earlier this year, Bank of America investment chief Michael Harnett singled out artwork as a sharp way to outperform over the next decade — due largely to the asset’s track record as an inflation hedge.

Investing in art by the likes of Banksy and Andy Warhol used to be an option only for the ultrarich. But with a new investing platform, you can invest in iconic artworks just like Jeff Bezos and Bill Gates do.

About the Author

Karen Thomas, CFA

Karen Thomas, CFA

Freelance Contributor

Karen Thomas, CFA, is a freelance contributor to MoneyWise.com.

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