As 2018 begins investors try to decide what the best investments are to get into. Last year it was marijuana stocks and technology companies. Will 2018 repeat the same trend? Probably not. When the economy grows faster the chair of the Federal Reserve tends to raise interest rates. Given how the GDP growth in the United States was over 3% for the two most recent quarters it is most likely that further rate hikes are in the cards for this year.

The best stock sector to benefit from rising rates is the financial industry. Companies such as JPMorgan Chase (NYSE:JPM) and Citigroup Inc (NYSE:C) have P/E ratios around 15 times which is a big discount compared to broad market indexes such as the Dow Jones Industrial Average, or the S&P 500 index which has a P/E ratio in the twenties range. Citigroup suffered a beating during the financial crisis of 2008 but has nearly doubled since early 2016, due to cutbacks and refocusing on its core business. For the last few years the stock has been increasing its dividends from 1 cent per share per quarter in 2014, to 5 cents in 2015, 16 cents in 2016, and 32 cents in 2017.

But higher interest rates can also be risky for Americans who have a lot of investment and consumer debt. Some people think leverage is risky because if interest rates go up then investors will feel the pain. But if we believe the following premises to be true, then we can see it’s not as doom and gloom as the critics make it out to be.