Rate Hike Risks: Mortgage REITs, Boeing, and Utilities Exposed

Investing in certain stocks can be hazardous to your portfolio, especially when interest rates rise. According to data, mortgage REITs, Boeing, and utilities are among the most exposed to rate hikes.

Mortgage REITs, which borrow short-term at low rates and lend long-term at higher rates, are particularly vulnerable. Companies like Annaly Capital (NLY) have a debt-to-equity ratio of 826%, making them highly sensitive to changes in interest rates. This is because their profits depend on the spread between short-term borrowing costs and long-term mortgage income.

A rate hike would instantly narrow or invert this spread, severely impacting these companies' profitability. Annaly Capital's high dividend yield of 13.2% is actually a sign that investors are pricing in the risk of a rate hike.