Beware hi PE stocks when the interest rate barometer changes
With much market conjecture of late around when the Fed will look to move towards normalising monetary policy, Ben Griffiths Portfolio Manager at Eley Griffiths Group has some advice on what happens to high PE stocks in an interest rate tightening cycle. When speaking at a recent Livewire event Griffiths said ,“hi PE stocks contract very quickly when interest rates start going up”. Griffiths highlighted stocks that he viewed had expensive price tags such as REA, Domino's (ASX:DMP), CSL (ASX.CSL) and Navitas (NVT.ASX) “those sorts of premium rates stocks with big ritzy PE’s they're the ones that get hit”. Being in a low rate environment for an extended time it is easy to forget how some stocks can react when central banks apply the brakes.