6 Winners Following A Rate Increase

With most analysts betting on an interest rate hike in December, there has been a lot of chatter about the negative effects that will follow. The US Federal Reserve is widely expected to raise its base interest rate at its policy meeting next week, something that will pull the bank into uncharted territory. So far, no central bank has been able to sustainably raise interest rates after such a long period of accommodation, leaving the Fed up against more than a few nay-sayers. Many believe that raising interest rates will hurt US firms as it will make the greenback even stronger and will in turn make their products less competitive in the global market. Others say the effects of higher interest rates will be felt by US consumers, causing them to pull back sharply and stall economic growth. The housing market may suffer as mortgages become more expensive and emerging markets are expected to struggle with higher borrowing costs. While there is a great deal that could go wrong following the Fed's rate hike, many believe that market fears are overdone and argue that a hike is necessary. The Fed adopted ultra-accommodative policies when the financial crisis hit, and with that period firmly in the past many believe it is time to get back to normal. The Fed has also promised to keep its pace of rate increases gradual so as to give the economy time to adjust to a period of tightening. Whether or not you believe that a rate hike is a good idea, one thing is for sure: it's coming. If a rate hike doesn't happen in December, it will almost certainly take place in the coming year, so it's safe to say that traders need to prepare for what's to come. All of the negative consequences that come with a rate hike have been plastered all over newspapers for months, but here's a look at some of the biggest winners come a Federal Reserve rate increase.

The financial sector is plagued by a high percentage of variable debt, or interest payments linked to the Fed's interest rate, so many companies in this industry could be hard hit by the Fed's rate hike as their debt payments will become more expensive. However, banks are also some of the largest

of a rate increase as the amount they charge borrowers is directly linked to the Fed's target rate. Banks typically hold a lot of US debt as well, so the rise in US Treasury bill yields and other American debt will also be to their benefit. Another way US banks will benefit from a rate hike is through increased confidence. Markets have been uncertain in recent weeks as the Fed's meeting approaches, but many believe that a rate increase is an overall good sign for the US economy as it indicates strength. A strong economy is good for banks because it means that private companies will spend on expansion, the financing for which they will obtain through banks.

The dollar is expected to appreciate as the Fed raises interest rates and the US currency has already been on the rise in recent days as markets prepare for what they believe to be an imminent rate hike. While some believe that the dollar won't skyrocket as much as expected, others say the current global economy has paved a path for the greenback to take off. Other central banks like the European Central Bank and the Bank of Japan are moving in the opposite direction by rolling out more accommodative policies, and they are expected to continue doing so in the year to come. That means their currencies are getting progressively weaker at a time when the dollar is set to rise. While other factors go into exchange rate calculations, the majority of market participants agree that the dollar will gain momentum following a rate hike. That can be good or bad news, depending on your position. For tourism in foreign countries, a strong dollar is great news as it will persuade American travelers to visit. However, for US multinationals, a stronger dollar cuts down on margins and makes their products less competitive.

Life insurance companies stand to

from a Federal Reserve interest rate hike as they typically earn a large proportion of their income by investing their customers' premiums. Most insurers look to the bond market for these investments, a space that has been battered in recent years due to the Fed's accommodative policies. While all types of insurers typically invest in order to make money, it is life insurers who stand to benefit the most from rising bond yields because of the length of time their policies are held for. The insurers aren't the only ones who will benefit from the rate increase either. Consumers will also find life insurance plans coming down in price as insurers are better able to mitigate their costs and increase margins without raising premiums.

There is much discussion over whether or not traders will benefit from the Fed's rate hike plans. While many are preparing for a market correction, others say that wise investments will continue to make money despite uncertainty. This is especially true for well-established companies with strong financials and low amounts of debt. Goldman Sachs put together a

of what it deems to be "High Quality Stocks" that it believes will continue to perform come the Fed's rate hike. Topping the list with a quality score of 95 out of 100 was

. The Information Technology space appeared to be one of the most resilient industries with five firms receiving scores above 90. The most appealing IT firm was internet giant

, followed by

and

. Other firms that received scores over 90 included

and

.

A rate increase is expected to be a negative for the US public in that it represents a shift in monetary policy from easy-money to more expensive borrowing. That means things like credit card debt, student loans, auto loans and mortgages will all become progressively more expensive as the bank slowly continues increasing its target rate in the coming years. However, it won't be all bad for everyone, savers and those with low debt could actually benefit from the Fed's interest rate hike. At the moment, savings accounts are paying out very little interest to customers because banks are struggling to eek out profits due to low rates. Once the Fed begins raising rates, banks will see larger margins and will be better able to pass those higher rates on to customers. Most analysts agree that it will take time for consumers to reap the benefits of the Fed's rate increase as many banks will likely

on passing the higher rate down for as long as possible in order to beef up their profits.

A successful interest rate increase would definitely be a major win for the US Federal Reserve as the bank's main objective has been to help support the US economy. There was much debate over whether or not the bank's easy-money policies would pay off, and a rate hike proves that there has been economic improvement— the bank's overarching goal. Many also believe that ending the ongoing market speculation about when the bank plans to raise rates will ultimately be good for traders as it will take away some of the volatility that has come ahead of each FOMC meeting for the past year. On the other hand the bank could be in for a rude awakening if its rate hike plans are not well received. Some say that the Fed's rate hike scheme will end badly and disrupt the nation's economic progress since the financial crisis. In this case, the bank would probably have to lower rates again, but it would have very few options at its disposal if more damage control needs to be done.