The US economy is moving from a period of weak economic growth, contained inflation and ultralow and/or falling interest rates into a period of stronger growth, faster inflation and rising rates.
Two of the most important implications of this shift are an improving outlook for financial stocks and a shift in favor of value names over growth-oriented stocks.
We explained the positive impact rising interest rates has on financial stocks in our article Time to Buy Banks. In that issue, we added a major bank to the portfolio. In this issue, we’re adding a smaller player, whose portfolio has gone from headwind to tailwind with the change in economic and market environments.