These stocks worked after the Fed’s taper announcement in 2013, and Wall Street sees them rallying again

Published Wed, Nov 3 202110:06 AM EDTUpdated Wed, Nov 3 20214:57 PM EDT

The Federal Reserve on Wednesday said it will begin easing its pandemic-era economic aid — and certain stocks that performed well after the central bank's last taper announcement in 2013 could rally again. At the end of the Fed's November meeting, the central bank announced a rollback of its $120 billion in monthly bond purchases starting at the end of the month, with the program set to end by the middle of 2022. There is little precedent to show how the stock market will react leading up to tapering. The first and only other time the Fed employed quantitative easing — when the central bank buys financial assets in the market to increase money supply and stimulate the economy — came in the wake of the Great Recession. When the central bank revealed the policy change in 2013, markets reacted with a so-called taper tantrum. The ensuing investor panic resulted in Treasury yields surging. That round of tapering began in January 2014. "The 2013-2014 … taper period is a useful, but imperfect, analog for the likely upcoming taper," Ned Davis Research's Ed Clissold said in a research note earlier this year. CNBC Pro looked at the stocks that performed well during the jump in rates sparked by the Fed's move to taper in 2013. We identified the names that gained at least 20% during the 2013 taper tantrum. We then filtered for stocks currently well-liked on Wall Street with room to run. CNBC Pro screened for names with potential upside of at least 20% based on average price targets, with at least 70% of analysts saying to buy the stocks. If rates move higher ahead of tapering, these stocks could work again: (Source: FactSet. As of Nov. 3, 2021) From the onset of taper talk in May 2013 to the start of tapering in January 2014, the top three performing S & P 500 sectors were industrials, consumer discretionary and financials, according to Ned Davis Research's analysis. Rising rates generally occur when the economy is recovering, which could explain why names aligned with the economic cycle appear on CNBC Pro's screen, such as General Motors , Visa and Alaska Air Group . To be clear, only one data series exists when it comes to how markets react to a taper announcement. The strong performance of these stocks during the prior taper tantrum may be unique to 2013 and not repeatable. Still, the names on CNBC Pro's screens are also Wall Street favorites.

Federal Reserve Chairman Jerome Powell attends the House Financial Services Committee hearing on Capitol Hill in Washington, U.S., September 30, 2021.

Al Drago | Reuters