14 ASX stock ideas ahead of the next RBA hike (and the ones most at risk)

Macquarie has taken a deep dive into the past five RBA tightening cycles to uncover which ASX sectors reliably outperform before a rate hike - and which ones tend to lag.

“We are increasingly closer to the beginning of [RBA] rate hikes,” the firm warns. 

“Hikes are a headwind for stocks, as they impact valuations today and earnings tomorrow. However, Fed cuts are a notable offset, supporting ongoing AI capex and US consumer spending.”

Looking back at every tightening cycle since the early 1990s, Macquarie finds that ASX stocks delivered a median total shareholder return of nearly 8% in the 12 months leading up to the first hike. Returns were positive in all five cases - a reflection of the same lift in growth and inflation that pushes the RBA to tighten also driving stronger earnings.

Put simply: rate hikes don’t arrive in weak economies. They tend to land when momentum is firm and corporate profits are accelerating. But that headline strength masks something far more important for investors: sector performance diverges sharply before the first move.

The sectors that lead the pack - and the 14 stocks to play them

Resources have been the most reliable outperformers ahead of hikes, driven mainly by mining, according to Macquarie's analysis.

"Late cycle sectors tend to outperform in the lead up to hikes. Resources have beaten All Industrials in the last five cycles, led by gains in mining, as the sector: i) benefits from stronger growth, ii) is a hedge against rising inflation; and iii) is at less risk of the PE de-rate that can impact All Industrials when bond yields rise (in anticipation of hikes)," Macquarie writes.

This cycle looks similar. Macquarie notes that names such as Rio Tinto (ASX: RIO), Pilbara Minerals (ASX: PLS), South32 (ASX: S32), Northern Star (ASX: NST), Perseus (ASX: PRU), Genesis Minerals (ASX: GMD) and Ampol (ASX: ALD) combine positive earnings revisions with solid momentum, factors that have historically driven returns in late-cycle phases.

Gold remains the best defensive group.

Banks also tend to outperform at this stage of the cycle. Rising nominal growth and strong credit demand usually translate into better profitability. Macquarie highlights ANZ (ASX: ANZ) and National Australia Bank (ASX:NAB), in banks, and Challenger (ASX: CGF), AFG (ASX: AFG) and ZIP (ASX: ZIP) in financial services where earnings trends are improving.

Transport stocks are another beneficiary, though more yield-sensitive infrastructure names can lag. Momentum in Aurizon (ASX: AZJ) and Orica (ASX: ORI) reflects the broader late-cycle uptick in activity.

The sectors that underperform - and the names to steer clear of

Historically, consumer-facing sectors lose steam before hikes as markets start to price pressure on household budgets. This year’s annual general meeting (AGM) season reinforces that pattern. Retailers spoke openly about cautious consumers, ongoing discounting and margin pressure.

"Early cycle cyclicals like Media, Retail and Discretionary often underperform in the lead up to hikes as the market starts to anticipate the best has passed," Macquarie says.

They flag Wesfarmers (ASX: WES), Super Retail Group (ASX: SUL), Premier Investments (ASX: PMV) and Bapcor (ASX: BAP) as names where earnings downgrades and weaker momentum are already evident.

Real estate is another area where rising yields tend to weigh on valuations. Several large-cap real estate investment trusts (REITs) reported soft operating trends, and consensus earnings revisions have shifted lower. Stocks such as Goodman Group (ASX: GMG), Mirvac (ASX: MGR) and Scentre (ASX: SCG) have seen pressure build through the recent reporting period.

Defensive sectors, led by food and beverages, insurance, healthcare and utilities have also underperformed into previous rate hikes. While they often recover once tightening begins, they tend to lag in the run-up. CSL (ASX: CSL), Treasury Wine Estates (ASX: TWE), Suncorp (ASX: SUN) and Origin (ASX: ORG) are among the names Macquarie sees as losing relative momentum.

The divergence between the US and Australia is positive for risk

Part of the reason Macquarie believes RBA rate hikes are becoming more likely is the improvement in growth data — including firmer business confidence and a lift in consumer sentiment. And because the catalyst is stronger growth, not weakening conditions, Macquarie stresses this is not a stagflation setup.

Australian two-year yields have moved above the cash rate, signalling rising expectations of a hike. In contrast, US two-year yields sit well below the Fed funds rate, implying at least two cuts.

"[Fed Chair Jerome] Powell's term ends in May 2026, and his successor is expected to be more dovish," Macquarie adds.

If the Federal Reserve moves earlier and faster than the RBA - an outcome Macquarie sees as increasingly plausible - a weaker US dollar and stronger commodity backdrop could amplify the late-cycle resource trade.

"A scenario where the Fed cuts despite improving growth also seems to favour stocks, gold and risk assets over bonds (as cuts drive up inflation and yields)," they write.