The Federal Reserve’s decision to increase its benchmark interest rate by a quarter-point was not a surprise. But Chairman Kevin Warsh’s comments and hawkish tone sparked a sell-off on Wednesday. CNBC spoke with several investors who said the Fed decision is also a catalyst to reposition portfolios and look for opportunities in some underappreciated parts of the market. Eyeing income Allan Boomer, CIO of Momentum Advisors, sees new opportunities in Treasurys and municipal bonds โ with benchmark 10-year Treasury note yield hitting 5%. “A lot my clients are overweight equities because of how much equities have run,” said Boomer. “I’m buying treasuries because I don’t want to take corporate risk at these levels. This is one of those moments when you look back and say ‘I wish I had bought bonds’, it’s like free money.” Brian Joyce of Lighthouse Investment Group also sees opportunities in bonds, but only in short duration. “I think you have a lot of folks that in longer duration bonds that are just going to get crushed if they continue to raise rates,” said Joyce. “I would buy short duration and get out of anything with intermediate to long exposure.” Boomer also like dividend stocks and ETFs with a focus on sustainability. “I’d be looking for companies with a low payout ratio, because that means the dividend is safe and secure.” Cyclicals UBS managing director Jason Katz sees cyclicals getting a boostfrom the Fed focusing on inflation with financials as the biggest beneficiary. “The biggest bang you are going to get for your buck in a rising rate environment is the major money center banks,” said Katz. “They have the greatest net interest margin benefit, plus capital market activity and a lot of other factors that will benefit in that environment.” XLF YTD mountain XLF year to date Katz said long term financials and the broader markets will benefit from the hike and potential another hike. “A hike or two shows credibility, anything north of two will dampen it,” said Katz. “I think it incentivizes a lot of companies that were thinking about raising debt or M & A activity.” Ultra high-new worthย investors Tad Fallows, founder of Long Angle,ย a group for investors with portfolios between $5 million and $100 million, said members are most bullish on large-cap stocks. “If rising interest rates put strain on company financials, larger companies will likely be better able to absorb that challenge than their smaller peers,” said Fallows. Long Angle ran a flash poll after the Fed rate hike with 53% of respondents seeing the biggest upside in tech, with energy and utilities. The poll encompassed 90 responses and was conducted Wednesday between 2 p.m. and 6:30 p.m. ET. “Both are driven by a view of them as part of the ‘picks and shovels’ play on AI. Everyone recognizes that AI requires electricity, and these two sectors provide it,” said Fallows. Members of R360, a group for investors with more than $100 million net worth, are focusing on the ripple effects of the rate hike and hawkish Fed. “Higher rates will make mortgages more expensive. They will squeeze consumers carrying credit-card balances, increase corporate refinancing costs and force private-equity firms to discover that adjusted EBITDA cannot actually make an interest payment,” said founder Charlie Garcia. Barbara Goodstein, founding partner and New York Chapter Chair for R360, said members are very focused on financials. Despite the macroeconomic uncertainty, she added that members are holding off on adding gold to their portfolios. “We think there is a bottom that is going to hi sometime in the near future and then gold will dramatically pop back up as there are more rate hikes.
