The cold hard message is sinking in. Higher rates are here to stay for longer than expected. Federal Reserve Chairman Jerome Powell has said multiple times that the Fed will be 'data-driven' when deciding on monetary policy. And the data has spoken. First, let's look at inflation. There has been great progress made in knocking inflation down from its peak of 9.1% in June of 2022. But achieving progress at the current lower levels, with inflation in the low-3% range, as expected, has been difficult. The Fed has been specific, saying inflation needs to be at 2% before restrictive policy will be eased. The Fed was patient after the January inflation data, and again with February data. But when March showed persistently higher prices, the Fed threw came right out and said that change can wait. Chairman Powell said the following last week. "The recent data have clearly not given us greater confidence..." and "If higher inflation does persist, we can maintain the current level of restriction for as long as needed." Now let's consider unemployment. The Fed again has been specific. Officials are looking for a 4.1% unemployment rate to gently (hopefully) slow the economy. Currently, the rate is not budging and is vacillating between 3.8% and 3.9%. Given the current macroeconomic backdrop, the following is a list of industries and companies we like that should benefit from a sustained period of higher interest rates. All are BUY-rated at Argus.

The Vickers Top Buyers & Sellers is a daily report that identifies the five companies the largest insider purchase transactions based on the dollar value of the transactions as well as the five companies the largest insider sales transactions based on the dollar value of the transactions.

Small- and mid-cap stocks (SMID) have underperformed large-caps over the past 12 months, but may be in a better position to generate market-beating returns going forward. SMID companies tend to focus on domestic markets, so their businesses could be less disrupted by the fallout from global events. As well, the prices of SMID stocks generally are lower than the prices of large-caps. As well, there are long stretches in the record books when SMID stocks have outperformed large-caps. That said, SMID stocks can be risky. The standard deviation for monthly returns was 5.7% for SMID stocks over a 2003-2021 test period, versus 4.3% for large-caps. Still, despite the risks, diversified investors look to have exposure to small- and mid-caps based on the long-term performance record.

Homebuilder confidence rose for a fourth month in March, according to the recent National Association of Home Builders/Wells Fargo Housing Market Index. The index value of 51 was the highest since July. A reading over 50 indicates that more builders see conditions as good than poor. "We expect more consumers to jump off the sidelines and into the marketplace if mortgage rates continue to fall later this year," said NAHB Chairman Carl Harris. On March 7, Fannie Mae released its Home Purchase Sentiment Index for February, which was up for a third consecutive month. The company's economist, Doug Duncan, said that despite the recent "uptick" in rates, consumers remain relatively optimistic that mortgage rates will decrease over the next 12 months. A decline in mortgage rates closer to 6%, which Fannie Mae expected at the time, could lead to a "further thawing of the housing market," Mr. Duncan said. This morning, the Commerce Department will report February Housing Starts. We expect 1.45 million starts at a seasonally adjusted annual rate, up 1.0% from a year earlier. On Thursday, we expect the National Association of Realtors to report February Existing Home Sales of 4.05 million (SAAR), down from 4.53 million in February 2023. On February 25, we expect the Commerce Department to report February New Home Sales of 680,000 (SAAR), up 8.8% year-over-year. Based on the March 14 GDPNow estimate from the Atlanta Fed, first-quarter GDP is expected to rise 2.3%, with a small-but-positive contribution from residential fixed investment. The S&P/Case-Shiller National Home Price Index jumped 5.5% in December. We expect it to rise about 4% for January. The Zillow Home Value Index was up 3.1% in January. The 10-year Treasury yield is a benchmark for mortgage rates. Its decline from nearly 5% in October has lead a 100-basis-point decline in the 30-year mortgage rate, to 6.74%. One risk factor we are watching is that the 10-year has retraced some of that move, rising to 4.33% yesterday from 3.87% on February 1, with a 20 basis point increase last week.