In our Mutual Fund Commentary yesterday we spoke about funds in focus if the US Fed decided against a rate hike as soon as September. Utilities funds demand attention then as low interest rate environment, which has for sometime been near a zero level, has been extremely conducive for its growth.  The capital intensive utilities industry needs to access external sources of funds to expand its operations. While it remains too close to call, today let’s look at funds that investors may immediately add to their portfolios if the Fed announces rate hike.

Amid the market volatility, the Fed seems to be stuck between global central banks’ easing measures, dollar strengthening, deflationary pressures arising from the energy sector and troubles in the global economy. While most polls recently turned against a September rate hike, a recent CNBC survey shows that 49% predict a rate hike now.

We do not rule away the chances of a rate hike completely, may be by 0.25%, but uncertainty is what is ruling the roost. Whether lifting the monetary policy stimulus would be a prudent move is the question that the Fed needs to answer. The two-day Federal Open Market Committee’s policy meeting ends today.

The finance sector, in this regard, seems to be a good bet, as several industries including insurance, banking, brokerage and asset managers tend to benefit from the rising rates. Before we pick the funds, let’s look at some other details.

CNBC Survey Goes Against Other Polls

According to a CNBC survey, 49% of respondents out of 51 economists are projecting a rate rise now. This data as of Sep 16 is in line with predictions on Aug 25. On the other hand, those believing in a delayed rate hike dropped to 43% from 47% on Aug 25. The rate has increased for those who are unsure, as the percentage is at 8% as of Sep 16 compared with 5% on Aug 25.

They predict that the Fed will finish hiking rate in this cycle, or take it to “terminal rate” in the first quarter 2018. This brings the prediction forward by six months.

Separately, most are of the view that markets have priced in the hike. While 56% believed its priced into stocks, 60% said its priced into bonds. However, the Standard & Poor’s 500 is estimated to finish 2015 at 2,032, lower that prior projection of 2,135.

Meanwhile, a Reuters poll shows that 45 respondents out of 80 economists believe that the Fed will leave its benchmark interest rate between zero and 0.25%. Only 35 respondents expected a rate rise. Looking at the primary dealers or economists from banks dealing directly with the Fed, 12 banks see no rate hike now as against 10 expecting a rate hike.

Financials to Gain