Sell These 3 Rate-Sensitive Stocks Before the Fed Strikes Again

Stocks to sell

The consumer price index accelerated at a faster pace than expected in March.

This has dashed hopes of a rate cut anytime soon. When the Federal Reserve meets towards the end of the month, there is likely to be more clarity on the policy stance.

An important point to note is that markets are prone to knee-jerk reactions. Any indication of delay in rate cuts will trigger a temporary sell-off. However, many continue to believe that the first rate cut is likely in 2024.

Therefore, examine this view on rate-sensitive stocks. Sell now for a potential correction as the policymakers delay rate cuts. Buy on correction or gradually accumulate in the next few months for a rally toward the end of 2024.

With this overview, let’s explore three fundamentally strong, rate-sensitive stocks to sell.

Chevron Corporation (CVX)

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Crude oil has been gradually trending higher on hopes of rate cut coupled with geopolitical tensions. With the likelihood of fed holding rates in the upcoming meetings, expect some correction in oil. Chevron Corporation (NYSE:CVX) is one stock that’s worth keeping in the radar but selling for now.

It’s worth noting that CVX stock has remained sideways in the last 12 months. If the stock fails to breakout on the upside, there is likely to be a 10% to 15% correction from current levels of $158. And CVX stock is worth accumulating around $135 to $140 levels.

Additionally, Chevron Corporation as an investment grade balance sheet. Further, the company expects production growth at a CAGR of 3% through 2027. With oil assets having an attractive break-even, Chevron Corporation is positioned for robust cash flows. This will ensure that dividends sustain and value creation continues through share repurchase. For now, the fed is likely to provide a better entry opportunity in CVX stock in the coming months.

Boise Cascade Company (BCC)

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When the latest inflation numbers were announced, the real estate sector was among the major losers. With interest rates being the cost of money, lower rates encourage investment in the housing sector.

Therefore, expect building materials companies to witness some correction. Boise Cascade Company (NYSE:BCC) is among the rate-sensitive stocks to sell. The company is involved in the manufacture of wood products and distribution of building materials.

Interestingly, BCC has rallied by 142% in the last 12 months. While the stock does not trade at premium valuations, a correction of 20% is entirely likely. And that would provide an ideal entry point for long term exposure.

For 2023, Boise reported revenue decline of 18% year-over-year (YOY) to $6.8 billion. For the same period, adjusted EBITDA margin contracted by 390 basis points to 11.1%. However, BCC stock has been trending higher on hopes of rate cuts and a better market condition. Inflation numbers will play spoilsport before renewed upside toward the end of the year or in 2025.

AngloGold Ashanti (AU)

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Even with higher inflation numbers, gold has remained firm. The precious metal trades near $2,400 an ounce. Yet, expect some correction in gold before the next rally.

AngloGold Ashanti (NYSE:AU) had traded at 52-week lows of $14.9 in October 2023. AU has surged by 60% from those levels and trades at $23.8. Some correction is likely to be in sync with gold trending lower.

However, gold is supported by factors like escalation in geopolitical tensions. Therefore, don’t expect a big downside. Yet, a 3% to 5% correction might be on the back of the monetary policy stance.

Specific to AngloGold Ashanti, production growth has been robust in the second half of 2023 as compared to the first half. Further, with a cash cost of $1,108 an ounce, the company positions for healthy operating and free cash flows. With quality gold assets, the long-term business outlook is positive with AU likely to witness a strong reversal after some correction.

On the date of publication, Faisal Humayun did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modeling. Faisal has authored over 1,500 stock specific articles with focus on the technology, energy and commodities sector.

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