3 Stocks That Did Well the Last Time the Fed Raised Rates Aggressively

The Federal Reserve recently increased interest rates for the first time in years, and additional hikes are anticipated. Consequently, investors may want to explore stocks that could thrive despite challenging conditions. In 2022, three notable stocks performed well when the Fed aggressively raised rates. ExxonMobil (XOM), Merck (MRK), and Super Micro Computer (SMCI) were among them.

ExxonMobil experienced remarkable gains, surging over 80% during that period, outperforming the S&P 500, which declined by more than 19%. The company is a prominent player in the oil and gas industry, benefiting from escalating oil prices, which also reached elevated levels by 2022. ExxonMobil's stock is currently up approximately 50% this year, making it an appealing option for investors seeking to hedge against market risk due to rising commodity prices.

Moreover, ExxonMobil offers a dividend yielding 2.4%, which is double the S&P 500's average of 1.1%. The company has a history of consistent dividend increases, suggesting that its financials are likely to improve further, potentially enabling it to maintain its dividend raises in the future.

Another stock that excelled in 2022 was Merck (MRK). Its shares rose by 45%, outpacing the broader market. The healthcare sector can be relatively insulated from economic fluctuations as pharmaceutical drugs and medical devices remain consistently in demand. Merck's sales grew by 22% in 2022, and its key cancer drug, Keytruda, experienced similar growth. The company's robust operations and high demand for its drugs contributed to its strong performance, even as other stocks faltered.

This year, Merck's stock continues to perform well, rising by around 40% despite current market conditions that may seem unfavorable. Additionally, Merck provides an above-average dividend, currently yielding 2.3%.

Super Micro Computer (SMCI) stands out as the most surprising performer among the three stocks. In 2022, its shares surged by nearly 87%, resulting in a significant increase from an initial valuation of around $2 billion to its current worth of around $18 billion. While it is currently up by a modest 8% this year, Super Micro's strong growth and substantial market valuation make it an intriguing investment option.

However, recent concerns over the company's auditor and its co-founder's legal issues cast doubt on its future stability, suggesting that investors should carefully reassess Super Micro's prospects before making any investment decisions.