4 FTSE 100 stocks to buy ahead of the Bank of England raising interest rates

The Bank of England is meeting on Thursday. Bond markets are pricing in a high expectation of a 0.15% rise in interest rates. Given the current level of 0.1%, this would more than double the base rate. Even though rates would still be close to zero, there’s also the potential for the committee to signal the potential for more hikes into 2022. Although this could be negative for the stock market in general, there are some FTSE 100 stocks that I think could benefit. Here are four that I am considering for my portfolio.

Areas to look out for

As a quick disclaimer, there’s no guarantee that the central bank will raise rates this week. It may be delayed to December, or even early next year. However, based on comments from the committee members, it’s clear that the bank will be raising interest rates soon. The chances of the next move being an interest rate cut to zero are highly unlikely.

One Killer Stock For The Cybersecurity Surge

Cybersecurity is surging, with experts predicting that the cybersecurity market will reach US$366 billion by 2028more than double what it is today!

And with that kind of growth, this North American company stands to be the biggest winner.

Because their patented “self-repairing” technology is changing the cybersecurity landscape as we know it…

We think it has the potential to become the next famous tech success story. In fact, we think it could become as big… or even BIGGER than Shopify.

Click here to see how you can uncover the name of this North American stock that’s taking over Silicon Valley, one device at a time…

On the basis of a hike soon, I need to think about the types of FTSE 100 stocks that would benefit. One sector that could benefit is banking. Major banks make money based on the difference between the rate on the money it lends out versus the interest it pays. If rates increase, this margin will increase (as most of the benefit is kept by the bank instead of being given to the customer).

Another area is retail trading and investment companies. Higher interest rates mean the expectation of a stronger economy. This should mean more disposable income for people, some of which could be invested. Further, changes to central bank policy are usually followed by periods of volatility in financial markets. This volatility could present trading opportunities, which brokerage firms benefit from via higher transaction fee revenue.

Finally, companies that have low interest-bearing debt are appealing. This is because interest rate hikes won’t impact these FTSE 100 stocks as much. Low debt means that even if the interest costs of servicing this debt increase, it’s manageable. In contrast, firms with high debt levels could see costs increase significantly.

Specific FTSE 100 stocks

From the banking space, I’d favour NatWest and Barclays. Both banks are up over 80% in a one-year period. However, both stocks have also done well over a three-month period, when interest rate speculation started to ramp up. I think this is a good sign that future hikes would correlate to higher share prices for these two stocks.

In terms of risks, banks are vulnerable if we see another downturn in the economy. This would increase bad debts, defaults, and lower spending activity.

Another FTSE 100 stock I’d consider buying is Hargreaves Lansdown. The retail investing platform is up 15% over a one-year period. Any market volatility should enable it to see higher trade volume being put through by clients. 

Finally, I’d consider buying JD Sports Fashion, with shares up 48% over one year. In its half-year results, interest-bearing debt stood at £263.9m. Yet with cash of £1.25bn, this meant that net cash stood at £995m. This relative lack of debt should aid the business going forward. 

On the flip-side, JD Sports does have a headache with the Competition and Markets Authority regarding the purchase of Footaslyum. This is something I need to keep an eye on.

FREE REPORT: Why this £5 stock could be set to surge

Are you on the lookout for UK growth stocks?

If so, get this FREE no-strings report now.

While it’s available: you’ll discover what we think is a top growth stock for the decade ahead.

And the performance of this company really is stunning.

In 2019, it returned £150million to shareholders through buybacks and dividends.

We believe its financial position is about as solid as anything we’ve seen.

  • Since 2016, annual revenues increased 31%
  • In March 2020, one of its senior directors LOADED UP on 25,000 shares – a position worth £90,259
  • Operating cash flow is up 47%. (Even its operating margins are rising every year!)

Quite simply, we believe it’s a fantastic Foolish growth pick.

What’s more, it deserves your attention today.

So please don’t wait another moment.

Get the full details on this £5 stock now – while your report is free.


Jonathansmith1 has no position in any share mentioned. The Motley Fool UK has recommended Barclays and Hargreaves Lansdown. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

This post was originally published on Motley Fool

Financial News

Daily News on Investing, Personal Finance, Markets, and more!