These Dow stocks — including Goldman Sachs — win big when rates rise

  • The 10-year Treasury yield broke above 3.1 percent on Wednesday for the first time since 2011.
  • If rates keep rising over the next three months, buying shares of Dow Jones industrial average members Goldman Sachs, Microsoft and Visa could be profitable, if history is any guide.
  • Apple and J.P. Morgan Chase are also big winners when rates surge.
Goldman Sachs CEO Lloyd Blankfein.
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Goldman Sachs CEO Lloyd Blankfein.

Interest rates have been surging recently, with the benchmark U.S. 10-year Treasury note yield hitting levels not seen in nearly seven years. Certain stocks have track records of strong returns when rates rise.

The yield broke above 3.1 percent on Wednesday for the first time since 2011. Investors have been selling Treasurys (prices move inversely to yields) amid fears that rising inflation could lead the Federal Reserve to tighten monetary policy faster than the market is expecting.

If rates keep rising over the next three months, buying shares of Dow Jones industrial average members Goldman Sachs, Microsoft and Visa could be profitable trades. Those three stocks returned at least 12.1 percent on average during three-month periods when rates were surging, according to data from Kensho, a hedge fund analytics tool.

Apple and J.P. Morgan Chase are also big winners when rates jump, averaging returns of 11.8 percent and 10.9 percent in three months, respectively. The Dow, meanwhile, averages returns of 4.8 percent.

(The CNBC Kensho search used the iShares 20+ Year Treasury Bond ETF as a proxy for the bond market. The search looked at periods of time when this ETF fell more than 5 percent in three months. Since bond prices move inversely to bond yields, this would correlate with an environment of rising rates.)

Meanwhile, General Electric and Walmart are among the Dow stocks that are the biggest laggards when rates jump. GE averages a loss of 1 percent during three-month periods of rising rates, Kensho data show, while Walmart averages a slight return of 0.3 percent. American Express, Coca-Cola and Procter & Gamble average returns of at least 1.7 percent, below the Dow's average returns during a surge in rates.

Disclosure: NBCUniversal was a minority investor in Kensho prior to the firm being acquired by S&P.