The portfolio winners and losers of rising rates, plus ETF tilts to capitalise

Rates are rising, and it’s not just mortgage holders who should pay attention. Mere weeks ago, the RBA hiked the cash rate to 4.10%, citing concerns over sticky inflation and the consequences of the US and Israel's war with Iran. Investment markets have been volatile and the ASX is down 9% from a month ago, while US markets are down around 5%.

Investors should keep in mind that inflation is likely to remain elevated, limiting the prospect of near-term rate cuts.

Even before the oil supply-shock from the war in Iran, Australian inflation had spiked upwards above the RBA’s typical target band of 2-3%.

“Regardless of the timing of the end of the war in Iran, we know that the supply disruption will remain over the coming months and will drive an uptick in headline inflation. 

We expect headline inflation to peak above 5% for the June quarter this year and trimmed mean inflation to peak at around 4% and remain above target into the middle of next year,” says My Bui, Economist for AMP.

Bui notes that the RBA is very likely to hike again in May.

While rising rates are a source of pain in some aspects of life (and investing), they influence different parts of your portfolio in a range of ways. Here’s what to expect and some options to access the benefits of higher rates. You'll also find some examples of ETF investments to kickstart your research.

The winners and losers of rising rates and inflation

Equities

Rising rates are not generally a positive for equity markets because increased rates mean increased costs of borrowing which translates to lower investment in growth. It can also affect their office leases, wage costs, and production costs.

Just consider the enormous borrowing and spend that many companies are putting into AI at the moment and what an increased cost of debt might mean for them.

That said, not all equities are created alike, so rising rates can benefit some sectors more than others.

“Energy and commodity producers which benefit from this environment will continue to perform and defensive sectors, like healthcare and consumer staples. 

Cyclical sectors like consumer discretionary will see the biggest hit early on because consumer budgets are hurting from both rate increases and rising fuel prices,” says Bui.

Some markets are also more affected by inflation and rising rates at present than others, with Bui pointing out that Australia started on a more concerning base and had only just started to emerge from three years of negative profit growth.

Investments to watch?

Bui notes that those companies able to fully pass through rate rises and inflation in their pricing are better positioned to manage the coming environment. Think infrastructure, utilities and energy companies. Consumer staples and other essentials are also good options to research.

“Traditional value sectors are likely to do better than growth in this environment, because we are likely to see a period of soft growth, not just in Australia, but abroad as well,” she adds.

Looking for an ETF tilt?

Some examples of value-focused ETFs include VanEck MSCI International Value ETF (ASX: VLUE) and iShares MSCI World ex Australia Value ETF (CBOE: IVLU) – these are globally focused.

To find value-specific ETFs that focus on Australian shares, investors would need to consider actively managed options that incorporate a value lens, such as Dimensional Australian Value Active ETF (ASX: DAVA) or IML Concentrated Australian Share Fund – Active ETF (ASX: IMLC).

If you are looking at specific sectors that may be better positioned against rising rates, such as infrastructure or healthcare, some options include Vanguard Global Infrastructure Index ETF (ASX: VBLD) or VanEck Global Healthcare Leaders ETF (ASX: HLTH).

Banks typically benefit from the ability to pass rates onto consumers in the short term. An example of an ETF in this space is the VanEck Australian Banks ETF (ASX: MVB).

Fixed interest

You may have heard it said that rising rates are great for retirees as they are predominantly in fixed income investments. The actual story for fixed income is not quite as simple as that.

Rising rates do correspond to higher yields on fixed income and bonds – but it affects the prices of your existing bonds. An increase in the cash rate means the prices of existing bonds fall to allow the yields on those bonds to appear in line with market rates. The longer a bond has until maturity, the more price-sensitive it will be. This means your portfolio of fixed income investments can fall with rate rises.

On the other hand, bonds with floating rates benefit during these periods and shorter term bonds can also benefit.

Investments to watch

This can be the time to look at shorter duration fixed income and floating rate investments which benefit in periods of rising rates and adjust to those rates.

Looking for an ETF tilt?

Some examples of floating rate ETFs include VanEck Australian Floating Rate ETF (ASX: FLOT) and Betashares Australian Bank Senior Floating Rate Bond ETF (ASX: QPON). You could also consider a shorter duration fixed income ETF like Vanguard Short Term Fixed Interest Fund (ASX: VCF).

Property

Property investors shouldn’t get themselves too excited for a fire-sale environment in Australia.

As Bui reminds investors, “We still have a chronic undersupply in Australian housing that has been a structural issue. This isn’t going to change with higher rates. We have tight vacancy rates and government policies like the 5% deposit scheme continues to boost demand and support property.”

Property is still likely to grow in Australia this year, but Bui expects a more muted 3-5% growth rate. She notes that CoreLogic data has indicated increasing rental prices in the last few months too.

Developers may find a harder environment to operate in, given the combination of increasing rates alongside fuel challenges. This is a threat to supply and a push for prices in existing builds.

Investments to watch

This could be a harder environment for developers. For property management businesses and REITs, focus on those that are able to manage rates and inflation by passing through costs in the form of increased rent and that have low debt and high quality assets.

For those looking at direct property, be it an investment or your primary residence, take the time to research areas with growing demand for rental and solid amenities and infrastructure in the suburb. Consider a buffer for rates as you plan for managing mortgage repayments. This is a period where it may be harder for some to get a foothold into the market.

Commodities

Certain types of commodities can benefit from inflation (which drives rising rates). For example, increases in oil traditionally rises with increasing costs of goods and services.

In the current environment, the rising price of oil is linked to a supply shock and high levels of demand, particularly in countries like Australia. This is in turn pushing up the costs of goods and services – and panic buying can exacerbate price pressures.

Commodities in the form of precious metals are often used as a hedge against inflation and rising rates and therefore can benefit. Gold is a key example of this and, while spot prices have fallen recently, USD gold prices are still up over 40% for the year and over 260% on a 10-year basis (Source: goldprice.org/gold-price-history.html as at 30 March 2026). Silver prices have also surged.

Investments to watch

“Energy and commodity producers are currently benefitting from the supply shock and rising prices,” says Bui.

An unnamed trader made millions off oil futures trading shortly before tensions escalated with Iran – looking at oil futures is a high risk strategy and your ability to generate returns will depend on when you see an end to the war in Iran and how quickly supply chains will ease (AMP suggest that, even if the war ended this week, it would still be months of disruption).

Precious metals like Gold and Silver can be a buffer against rates and inflation – you could also consider an equities approach to these by looking at miners, but bear in mind these will be subject to equity risks and market volatility. It's also worth noting that diesel prices can have a significant impact on the cost of production.

Looking for an ETF tilt?

If you are looking to add a tilt to oil, Betashares Crude Oil ETF (ASX: OOO) could be an option for exposure.

You could also gain broader energy and resources exposure via ETFs like SPDR S&P/ASX 200 Resources Fund (ASX: OZR), VanEck Australian Resources ETF (ASX: MVR) or Betashares Global Energy Companies ETF – Currency Hedged (ASX: FUEL).

For exposure to gold and silver, there are ETFs with bullion exposure like GlobalX Physical Gold (ASX: GOLD), Perth Mint Gold (ASX: PMGOLD), Betashares Gold Bullion ETF – Currency Hedged (ASX: QAU) and VanEck Gold Bullion ETF (ASX: NUGG). Options for silver exposure include Global X Physical Silver (ASX: ETPMAG) and Global X Physical Precious Metals Basket (ASX: ETPMPM).

For miners, some options include VanEck Gold Miners ETF (ASX: GDX) or Betashares Global Gold Miners ETF – Currency Hedged (ASX: MNRS).

Alternatives

The impact of rising rates can vary depending on the type of alternative. For example, private credit may benefit as it typically uses floating rates while private equity may find constraints in certain types deal activity. Hedge funds, using strategies like long-short equities, derivatives and event-driven strategies, can also benefit from the market conditions and volatility.

Investors often seek out alternative investments in periods of market volatility and rising rates to provide diversification and a buffer within portfolios.

Investors should note that commodities, property and infrastructure are typically grouped within alternatives but I separated them out in this article to offer more detail.

Investments to watch

Depending on the gaps in your portfolio, this might be a good opportunity to take a closer look at incorporating alternatives within your strategy.

Strategies like private equity, private credit and hedge fund strategies are active strategies so you’ll find there are a range of costs associated with these beyond passive index investing.

Looking for an ETF tilt?

Alternatives have a range of complexity so adding them to a portfolio should be considered less a temporary tilt and be considered as how it works within your broader strategy. They are typically long term investments and can carry a range of risks.

Increasingly, fund managers are making alternatives strategies more accessible for investors through ETFs and some examples include VanEck Global Listed Private Equity ETF (ASX: GPEQ) and VanEck Global Listed Private Credit ETF (ASX: LEND).

There are listed options beyond ETFs in the alternative investments space in the form of listed investment companies and listed investment trusts. Some examples include WAM Alternative Assets (ASX: WMA), Metrics Master Income Trust (ASX: MXT), Pengana Private Equity Trust (ASX: PE1) and Regal Investment Fund (ASX: RF1).

Cash

Rising rates are typically good for returns on savings accounts and term deposits. It can also be a positive for currency.

“The Australian dollar has done well over the last year as markets priced in rate hikes. 

Given Australia’s inflation challenges compared to other countries, we believe the Australian dollar can continue to do well over the next one-to-two years,” says Bui.

An added plus? If inflation hasn’t killed off all your discretionary spend, your travel money may extend a little further… that’s if the airline fuel costs don’t put paid to that too.

Investments to watch

High interest cash and term deposits look appealing in this environment. Those with foreign investments may also consider whether currency hedging is beneficial to hedge against a stronger Australian dollar.

Looking for an ETF tilt?

There are many options for cash related ETFs in Australia. A few examples include Betashares Australian High Interest Cash ETF (ASX: AAA), VanEck Cash Plus Active ETF (ASX: MONY) and iShares Enhanced Cash ETF (ASX: ISEC).

Beating inflation and rates

When it comes to investing, it’s a case of ‘settle in for the ride’. That’s true regardless of the year, though this year could be a tough one.

AMP’s Bui believes inflation and rates are going to create a rocky year for Australians, tipping total household consumption growth to halve by the June quarter and even drop to 1.2% by the December quarter (it was 2.4% for the December quarter 2025).

“We started from a strong pace of growth and inflation. Unfortunately, at the moment, the price hikes right now are in essential areas you can’t cut back on. You still need to buy food, for example, or need fuel to drive the kids to school.

Rates don’t have a massive impact straight away. We’ll start to see lower consumer spending, especially on the discretionary side from the second quarter on,” she says.

Those considering making changes to their portfolios should consider the basics first – that is, whether their needs, goals and circumstances match with the existing strategy in their portfolio, what gaps there might be and then consider expert advice from there. 

Volatile periods are not necessarily the time to make wide-sweeping changes but can be an opportunity for measured tilts to take advantage of market conditions and buffer against challenges.