Where to look for opportunity amidst rising rates and inflation?

The U.S. Fed is expected to be aggressive in raising rates and removing accommodation this year, but the opportunities remain plentiful for the equity investors, says Edward Jones’ Mona Mahajan.

According to Mahajan, the U.S. consumer continues to be relatively healthy, and the economy is likely to grow by 3.0% to 4.0% this year. This morning on CNBC’s “Squawk Box”, she said:

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In this backdrop with rising rates and inflationary pressures, we like value cyclical names. Remember, financials tend to do well as rates rise. Energy, industrials; all can do well, especially if we get a reopening 2.0 and we see a global rebound in travel, leisure and those types of services.

Mahajan recalls that the benchmark S&P 500 index has a history of keeping strong amidst Fed tightening and sees the talk of recession rather premature at this point in time. Goldman Sachs is now calling for seven rate hikes in 2022.

Mahajan is also interested in emerging markets

The chief investment strategist at Edward Jones also sees opportunity in the emerging markets that are so far in the green for 2022. During her interview with CNBC, she added:

We’re also looking outside of the U.S. particularly towards the emerging markets that are up year-to-date. We think those are less exposed to some of the higher valuation tech sectors as well. So, in the near-term, we continue to favour value cyclicals and EM as we head into the Fed meeting.

She also sees healthcare, staples, and high-quality, reasonably valued tech names as a smart pick, but only for later in the cycle. Last week, KAR’s Julie Biel said tech companies that provide niche-specific software are well-positioned to survive inflation.