1. The Fed just got 271,000 new
reasons to boost interest rates.
Investors had better get ready.
The door is wide open for the
Federal Reserve to increase
short-term interest rates when it
meets in December following the
report on Friday showing compa-
nies added 271,000 jobs in Octo-
ber. If the move in rates comes, it
could signal a tectonic shift in the
marketplace and prompt inves-
tors to tear up the playbook that
has basically been printing them
money the last few years.
Overnight, higher rates went
from a coin toss to a very strong
possibility. Futures markets now
indicate there’s a 70% chance the
Fed takes rates up in December,
according to Bloomberg News.
That’s up from Thursday when
the implied odds of a rate hike
were 56%. Savvy investors know
it’s perilous to ignore pending
moves by the Fed because higher
interest rates can dramatically
change the investment climate.
How much? The benchmark
Standard & Poor’s 500 index has
seen its average gain shrink to
2.4% in the six months following
an initial Fed rate hike going back
to 1971, says Sam Stovall of S&P
Capital IQ. Compare that to the
9.5% average gain in the six
months prior to hikes.
Some markets are already be-
having like a rate hike is a fore-
gone conclusion. Stocks that have
been attractive during the period
of practically zero interest rates
are suffering now because inves-
tors figure the party is just about
over. Utilities stocks were hardest
hit Friday, with the Utilities Se-
lect Sector SPDR exchange-trad-
ed fund falling 3.7%. That’s the
largest decline among the 10 sec-
tors in the S&P 500. If interest
rates rise, that makes the fat divi-
dend yields traditionally paid by
utilities relatively less attractive.
Similarly, real estate invest-
ment trusts, which have been
hugely popular with investors be-
cause of their rich dividends, fell
too. The Vanguard REIT ETF
dropped 2.9%. Bond investors
also felt the pain. The Vanguard
Total Bond Market ETF lost 0.4%.
Things could be close to chang-
ing. Investors seem to think fi-
nancials could be the winners.
The ability to boost interest rates
on loans — as long as demand re-
mains strong — could lift bank
profits. The Financial Select Sec-
tor SPDR is up 0.9% Friday, the
best performer of the 10 industry
sectors. But longer term, financial
stocks have been laggards when
the Fed starting to lift rates.
Playing this major market shift
will keep investors occupied the
next couple months as the Fed
goes from background risk to
front-burner concern. There will
be places to make money, though.
Energy, consumer goods, food
stocks and ultimately utilities
wind up being the best areas for
investors during periods of rising
rates, says Robert Johnson, presi-
dent of the American College of
Financial Services and co-author
of Invest with the Fed. Commodi-
ty prices also tend to be strong,
due to increased inflation, which
in turn helps emerging markets
stocks. Many companies in
emerging nations are closely tied
to commodity prices.
But one thing is for sure. This
is not the time to fight the Fed.
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MONDAY, NOVEMBER 9, 2015 SECTION B
USA SNAPSHOTS©
Health care costs
Source Guardian Life analysis
JAE YANG AND JANET LOEHRKE, USA TODAY
65-year-old
woman can
expect
13%higher health
care costs than
a 65-year-old
man during
retirement.
INDEX CLOSE CHG
Dow Jones industrials 17,910.33x 46.90
Dow for the week x 246.79
Nasdaq composite 5147.12x 19.38
S&P 500 2099.20y 0.73
T-bond, 30-year yield 3.09%x 0.09
T-note, 10-year yield 2.33%x 0.10
Gold, oz. Comex $1087.90y 16.30
Oil, light sweet crude $44.52y 0.68
Euro (dollars per euro) $1.0745y 0.0142
Yen per dollar 123.21x 1.54
SOURCES USA TODAY RESEARCH, MARKETWATCH.COM
FRIDAY MARKETS
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There are two, and
maybe only two,
strategies for success
in media: Do what
everybody else is do-
ing, or do the opposite.
What everybody wants to do
now, of course, is forge a digital
strategy — that is, a new digital
strategy, to be distinguished from
the former failed one. This result-
ed last week in a movement of
digital deck chairs: Time’s digital
guy, Scott Havens, went to
Bloomberg, and NBC hired Nick
Ascheim from BBC America,
showing Julian March and Rich-
ard Wolffe, who had brief digital
tenures respectively at NBC and
MSNBC, the door.
Everybody wants to reach Mil-
lennials. Hence, last week, A&E
gave Vice one of its cable chan-
nels to run.
For a true instance of doing
something profoundly contrary,
there was Alexander Chancellor,
75, a British editor who was in the
USA for the past few weeks to
promote his magazine, The Oldie.
The Oldie is a small phenome-
non of British publishing, a grow-
ing and profitable magazine that
celebrates a certain sort of crank-
iness and deftly turns its back on
any interest in the young, or even
in being young. Indeed, reading
The Oldie is not so much to feel
that you’re old — not like, for in-
stance, Modern Maturity, with its
rapturous celebration of retire-
ment possibilities — but to feel
that the young and their aspira-
tions and enthusiasms do not ex-
ist. Or at least don’t impinge on
the world in any meaningful way.
The unstated but powerful
message of The Oldie is a deep
satisfaction, even sense of value,
in not having to keep up.
Nothing ‘Oldie’ is
new again, thanks
Michael Wolff
@MichaelWolffNYC
Michael@burnrate.com
USA TODAY
MEDIA
v STORY CONTINUES ON 2B
The S&P 500 has average returns of 9.5% in the six months before a rate hike and 2.4% in the six months after. Here are the
best and worst sectors for investors when the Fed starts raising the rate, based on same criteria: SECTOR, BEFORE, AFTER
MARKET SECTORS REACTION TO RATE HIKES
Financials
8.0% -0.8%
Technology
12.3% 6.5%
Materials
9.3% 0.2%
Telecom
7.6% 5.8%
Consumer
discretionary
8.9% 1.9%
Industrials
9.7% 1.2%
Health care
8.5% 1.5%
Energy
15.4% 3.1%
Consumer
staples
9.4% 1.2%
Utilities
3.4% 1.4%
SOURCES: S&P CAPITAL IQ,
USA TODAY RESEARCH
CHIP SOMODEVILLA, GETTY IMAGES
Fed Chair
Janet Yellen
and her
colleagues
may raise
interest rates
in December.
INVESTORS: HOW TO PROFIT
FROM INTEREST RATE HIKES
Matt Krantz
USA TODAY
ASTRAZENECA ACQUIRES
ZS PHARMA FOR $2.7 BILLION
U.K. drug giant AstraZeneca
plans to acquire smaller drug
company ZS Pharma in an all-
cash deal for about $2.7 billion.
The acquisition is expected to
close by the end of 2015. The San
Mateo, Calif.-based drug com-
pany has a key drug ZS-9, cur-
rently under review by the Food
and Drug Administration, for the
treatment of chronic kidney
disease and chronic heart fail-
ure. The annual global sales
peak year forecast for ZS-9
exceeds $1 billion, the compa-
nies said.
LUFTHANSA STRIKE
EXPANDS TO MUNICH
A strike by Lufthansa flight at-
tendants has spread to Munich,
beyond the German carrier’s
Frankfurt and Dusseldorf hubs.
Lufthansa will operate 70% of its
planned flights Monday, but will
cancel 929 to and from those
cities. That will affect about 113,
000 passengers, the airline says.
The cabin crew union’s strike on
Friday grounded flights to and
from Frankfurt and Dusseldorf,
about 10% of Lufthansa’s flights.
With a Sunday break in the
strike, the airline said it wanted
to resume talks with the union.
The parties are clashing over
pension benefits and the union
has warned of disruptions
stretching well into the week. It’s
the largest strike in Lufthansa’s
history, the airline says.
ACTIVISION BLIZZARD SAYS
‘GAME ON’ TO STUDIO PLAY
The No. 1 video game publisher
in the USA seeks to play in movie
theaters and on TV. Activision
Blizzard is starting its own studio
to make original movie and TV
programming based on their
multibillion-dollar video game
franchises. The first project is a
“Skylanders Academy” TV show
founded on the children’s toys-
to-life Skylanders franchise. Also
in the works: a “Call of Duty”
movie. The latest edition in the
series, “Call of Duty: Black Ops
III,” released Friday, is expected
to be the year’s top-selling
game. Last week, Activision
Blizzard also expanded its
game portfolio with the acquisi-
tion of King Digital, maker of
“Candy Crush Saga.” Nick van
Dyk, the studio’s co-president,
said “This gives us a huge, pas-
sionate and deeply-engaged
audience.”
MONEYLINE
ANDREW YATES, AFP/GETTY IMAGES