These stocks worked the last time the Fed started hiking rates and Wall Street likes them now

Published Tue, Dec 14 20211:50 PM EST

On Wednesday, the Federal Reserve is likely to set the stage for several interest rate hikes next year. If history is any guide, some stocks perform better than others when the central bank decides to tighten policy. Now that the Fed is tasked with addressing the highest levels of inflation in 39 years, the central bank is widely expected to announce an acceleration of the tapering of its bond buying program, which was put in place during the pandemic to prop of the economy. A CNBC Fed Survey predicts the Fed will double the pace of the taper to $30 billion at its December meeting, which would roughly end the $120 billion in monthly asset purchases by March. The central bank will then hike rates three times in each of the next two years, starting in June 2022, the survey respondents predict. Some specific equities perform well in the months after interest rates are raised. CNBC Pro looked at the last two times the Fed started a rate-hiking cycle and which stocks worked 6 months out from the first raise. The last two times were in 2004 and 2015 and the S & P 500 was up 6.2% and about flat, respectively, over those subsequent six months, according to Strategas Research. Yet, some stocks performed well in the rising rate environment. Take a look at the names that saw gains of at least 10% in the 6 months following the first Fed hikes in 2004 and 2015. Plus, these names are well-liked by analysts today. At least 60% of analysts assign them a buy rating and the stocks are expected to rally more than 10% in the next 12 months. CNBC Pro's list is full of cyclical stocks, those tied to economic health, since the Fed typically only begins to hikes rates when it believes the economy is strong enough to handle it. Materials stocks Freeport-McMoRan and FMC Corp. gained 65% and more than 21%, respectively, in the six months after the first 2015 rate hike. Then, the pair gained 15% and 12%, respectively in the time after the first 2004 rate hike. Freeport-McMoRan and FMC Corp. are also well-liked on Wall Street. Freeport-McMoRan is expected to rally more than 15% and FMC Corp. is forecast to gain 16% in the next 12 months. Chip stock Nvidia also made CNBC Pro's list. The semiconductor company rose more than 27% and 11% during months after the 2015 and 2004 rate hikes, respectively. Plus, Wall Street analysts see Nvidia rising more than 21% in the next year. Global Payments is the only financial name on CNBC Pro's list. The stock rose 13% in 2015 and 30% in 2004 following the central bank's first rate hikes. Wall Street sees the payment company soaring 52% in the next 12 months. Devon Energy could also be a safe stock to own heading into next year's rate hikes. The energy stock gained 10% in 2015 and 18% in 2004 following rate hikes. Plus, Devon Energy is expected to rise more than 25% in the next year. AES Corp. , Jacobs Engineering Group , Parker-Hannifin Corp. , and Quanta Services also earned spots on CNBC Pro's list.

Nvidia headquarters in Santa Clara, California, Feb. 23, 2021.

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