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10 Healthcare Stocks to Stave Off the Market Flu

While the markets run up and down because tech stocks are doing one thing or another, or retailers struggle to improve same-store sales, there isn’t much debate about the future of the healthcare sector.

10 Healthcare Stocks to Stave Off the Market FluSource: Shutterstock

Most developed economies’ populations are getting older. In the U.S., that’s certainly apparent as the baby boomers start their decades-long transition to retirement age.

But, the same is also happening in Europe, Japan, even China. That means more people will need more healthcare.

But, you can’t simply buy whatever you want. You have to find stocks that aren’t caught up in the hype. Plenty of small and mid-sized healthcare firms are well-positioned for this megatrend.

I’ve detailed some healthy ones below. Here are 10 healthcare stocks to stave off the market flu and prosper for years to come.

Healthcare Stocks to Stave off the Market Flu: Vertex Pharmaceuticals Incorporated (VRTX)

Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) is a mid-cap biotech company that’s also the leading player in remediating the debilitating effects of cystic fibrosis (CF).

Healthcare Stocks to Stave off the Market Flu: Vertex Pharmaceuticals Incorporated (VRTX)Source: Shutterstock

CF affects about 30,000 people in the U.S. and 70,000 people worldwide. The disease begins by affecting the lungs, but eventually moves to other organs, creating more complications as the patient gets older.

VRTX now has a three-drug combination that will help significantly more CF patients increase their lung capacity, as it treats the underlying cause of the disease, rather than just its symptoms.

Vertex also has a handful of other drugs in the pipeline that treat conditions such as sickle cell anemia, influenza and acute spinal cord injury.

Healthcare Stocks to Stave off the Market Flu: Cutera, Inc. (CUTR)

Cutera, Inc. (NASDAQ:CUTR) develops laser and other energy-based systems for cosmetic dermatological systems.

Healthcare Stocks to Stave off the Market Flu: Cutera, Inc. (CUTR)Source: Shutterstock

Simply put, the company makes devices used for laser hair removal, lightening pigmentation, even the temporary reduction in the appearance of cellulite. These devices are in increasingly high demand as younger generations in the West are looking for more permanent solutions to shaving.

What’s more, this is no longer just for women. Many men are seeking out these treatments for long-term removal of body hair. This trend has been very popular in Asia, but is really gaining momentum in the West.

Plus, since most of this isn’t covered by healthcare plans, the growing demand is a bullish sign that, as the economy recovers, so will CUTR’s business.

Healthcare Stocks to Stave off the Market Flu: Myriad Genetics, Inc. (MYGN)

Myriad Genetics, Inc. (NASDAQ:MYGN) is a small-cap ($2 billion market cap) company that claims to be the “global leader in personalized medicines.”

That’s certainly a big claim for a small company. But, some of MYGN’s products have gotten very positive attention from the healthcare industry, and big pharma in particular.

To give you better idea of what personalized medicine means, one of the company’s products, GeneSight, tests to determine which antidepressant would be the best for a given patient. Another, RiskScore, helps women predict the odds of developing breast cancer, given genetic markers and clinical risk factors.

MYGN also has a drug that’s being co-marketed with two big pharmaceutical firms for use in treating ovarian cancer.

This new field has a lot of potential, but it will be a volatile ride if you decide to get on board.

Healthcare Stocks to Stave off the Market Flu: Sinovac Biotech Ltd. (SVA)

Sinovac Biotech Ltd. (NASDAQ:SVA) is the largest vaccine maker in China. That may not sound like the sexiest kind of drug company, but the fact is, with 1.4 billion people — and a relatively antiquated healthcare system for most of them — starting with the basics is huge.

China is now the second largest economy in the world, yet it has yet to break through its image as a developing nation. It wants inclusion and respect as a developed nation but has to build out its infrastructure that dates back to Mao’s agrarian reform movement.

Currently, China has dozens of cities with more than 1 million people, as citizens leave the farms for work in the digital era. But, that concentration of people also means viruses can spread quickly and disrupt huge populations.

As a native Chinese company, SVA will get a significant amount of support from the government as it modernizes healthcare for the population. It only has a $470 million market cap now, but it has huge potential.

Healthcare Stocks to Stave off the Market Flu: Corcept Therapeutics Incorporated (CORT)

Corcept Therapeutics Incorporated (NASDAQ:CORT) is a $1.9 billion market cap biotech that specializes in severe metabolic, oncologic, and psychological disorders.

One of its top drugs, Korlym, targets Cushings Syndrome, which is brought on by long-term exposure to an overproduction of the stress hormone cortisol.

Perhaps the most interesting aspect of CORT’s deep understanding of cortisol and how it effects the body is the notion that its regulation may have significant effects in treating everything from Type II diabetes to cancer to depression.

Right now, CORT is engaged in a battle with leading generics producer Teva Pharmaceuticals Industries Ltd (NYSE:TEVA) over alleged patent infringement for its top-selling drug, Korlym. TEVA is hoping to make a generic version.

This battle has taken some of the steam out of CORT stock for now, but its unique and promising pipeline means you’re buying at a discount.

Healthcare Stocks to Stave off the Market Flu: Chemed Corporation (CHE)

Chemed Corporation (NYSE:CHE) is an interesting business. It has two divisions: a palliative care and hospice division called Vitas Healthcare, and Roto-Rooter, a franchise plumbing business.

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While those seem like strange partners, CHE has a respectable $4.5 billion market cap and more than 14,000 employees.

Obviously, in this format Vitas Healthcare is the side of the operation that bears highlighting.

The fact is, as the population ages, the more palliative care — which includes physicians, nurses, social workers, and clergy — people will require. Plus, the fact that these services are the last stage of the journey for patients also means they are more likely to be covered, since they are not open-ended expenses.

CHE stock has well outpaced the market over the past 12 months.

Healthcare Stocks to Stave off the Market Flu: WellCare Health Plans, Inc. (WCG)

WellCare Health Plans, Inc. (NYSE:WCG) is a mid-cap provider of managed care services for government-funded healthcare programs. That means the company manages Medicare and Medicaid for its subscribers. It has about 4.4. million members across all 50 states.

Given the changing face of healthcare in the U.S., and all the talk of insurers and healthcare providers merging with all manner of firms in complementary industries, WCG is certainly in a dynamic sector.

But, that can be a good thing, since it is unlikely that Medicare and Medicaid will be going away any time soon. And, a company that knows how to manage these plans — and has a 4.4 million person customer base — has a lot going for it.

Healthcare Stocks to Stave off the Market Flu: Magellan Health Inc (MGLN)

Magellan Health Inc (NASDAQ:MGLN) is another mid-cap healthcare company that works with government-funded healthcare programs, has a prescription benefits management (PBM) arm, and manages specialty programs like employee assistance programs (EAPs) and physical programs.

MGLN is a triple threat. Given its size and the interest in this space, it is a perfect addition to a larger company looking to consolidate its place in the industry, or for a new company to expand in the changing healthcare arena.

MGLN stock is up 60% over the past 12 months, which is impressive for a healthcare company. And, it’s likely that any buyout offer would see it go at an even larger premium.

Healthcare Stocks to Stave off the Market Flu: U.S. Physical Therapy, Inc. (USPH)

U.S. Physical Therapy, Inc. (NYSE:USPH), as its name implies, provides pre- and post-operative care for orthopedic and sports-related disorders. It also manages physical therapy facilities for third parties.

While it’s a small-cap stock ($1 billion market cap), USPH has spread its services across the U.S., with more than 500 clinics in 42 states.

This is one of those key niches that will see great benefit from the graying of the population. Decentralized, privately run rehab facilities for muscle and joint issues are either magnified by aging or are traumatic sports injuries (which will likely end up chronic age-related issues).

It’s no surprise that patient revenue was up 14% for Q4 compared to the same quarter last year, and management revenue also increased.

Healthcare Stocks to Stave off the Market Flu: Almost Family, Inc. (AFAM)

Almost Family, Inc. (NASDAQ:AFAM) is a small-cap company with big plans.

On April 1st, management finalized a merger with Louisiana-based LHC Group, Inc. (NASDAQ:LHCG), making the combined company the second-largest home healthcare provider in the U.S.

AFAM is in a particularly interesting sector of healthcare that is starting to grow rapidly. And given its size, it’s in a perfect place to take advantage of all that growth.

Healthcare has become decentralized to the point where many people can get the care they need in their homes. With assisted living facilities being to costly for many people, or they simply want to age in their homes, bringing various services to them that are increasingly covered by Medicare or Medicaid helps both patients and the federal and state government’s healthcare bills.

This is a trend that will continue and AFAM is becoming a key player in the space.

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The One Way to Keep Beating the Market by 50%

Michael A. Robinson
Michael A. Robinson

Sometimes it pays to sound like a broken record.

Literally…

For several years now, I’ve been telling investors – over and over again – that if you want to transform your net worth… if you want to secure a wealthy retirement… you absolutely have to be in high tech and the life sciences.

Like we always say, the road to wealth is paved by tech…

bull-stock-marketI’m bringing this up with you today – because I can prove it.

Yesterday marked the eighth anniversary of the bull market, the second longest on record.

During this period, the S&P 500 rose roughly 207%, turning every $10,000 into $30,700. That sounds great.

Until you compare it to tech…

The tech-heavy Nasdaq Composite did nearly 50% better. From March 9, 2009, through yesterday’s close, it had gained nearly 308% – turning every $10,000 invested into $40,800.

You might think this is over.

However, over the last few days, we’ve gotten two pieces of evidence that tell me this market still has life.

We’ll talk about those in today’s report.

Better yet, I’ll reveal three of my favorite cost-effective but profitable ways to play this tech boom.

Let’s go…

The Evidence Mounts

If you’re one of those investors wondering if this “generational” bull market is about to die of old age, I don’t blame you.

After all, this one is three years longer than the average bull run.

It now ranks as the second-longest bull market on record, after the rally that ran from Oct. 11, 1990, through March 24, 2000.

While that’s quite a long time to go without a break for a bear market – i.e., a 20% decline – there’s no rule that says a bull market must come with an expiration date.

This isn’t a jug of milk or a pound of hamburger meat we’re talking about here…

We generally see a bear market when we enter a recession – and no economist I know of expects one of those any time soon.

Even better: Our economy is actually gaining steam.

President Donald Trump wants to grow the economy at a 3.5% yearly rate, or nearly 46% faster than the average 2.4% we’ve had over the past eight years.

Plus, Congress is expected to take up tax cuts later this year. Doing so would give businesses extra money to hire more workers and consumers extra disposable income.

That, though, is the future.

Here’s the present – two pieces of evidence that tell me this bull market has legs…

A very strong jobs report:Two days ago, we got word that U.S. private-sector jobs grew by 298,000 last month, according to data from payroll services firm Automatic Data Processing Inc. and forecasting firm Moody’s Analytics. That was 58% better than Wall Street had expected.Retail investors:That may sound counterintuitive, because at market tops we often see people who were late to the party getting gripped by greed and making risky plays. We’re not seeing it this time around. In fact, it’s just the opposite. Instead of taking on buckets of risk, Main Street investors are moving heavily into exchange-traded funds. ETFs trade like stocks but are funds that hold multiple equities. They can be broad as an index but tend to focus on discrete sectors, like chips or software.The Wall Street Journal reports that investors have poured $124 billion into ETFs in 2017. That makes this the most aggressive beginning of a year since ETF investing got started 24 years ago.

I’m sure many of us are involved in this huge trend. In fact, we may have helped get this thing started.

So let’s again look at my favorite three favorite funds of the moment – our 2017 Tech Wealth Gems – and my strategy for screening them and any other ETFs you might be investigating…

Three Ways We’re Ahead of This Crowd

Tech Wealth Gem No. 1
The iShares North American Tech ETF (NYSE Arca: IGM) covers the big leaders in tech. Apple Inc. (Nasdaq: AAPL), Microsoft Corp. (Nasdaq: MSFT), Amazon.com Inc. (Nasdaq: AMZN), and Facebook Inc. (Nasdaq: FB) anchor this fund, making up 30% of its portfolio. IGM has a great track record. It rose 16.6% in 2016, and over the past five years it has clocked 17.4% yearly gains. Plus, it’s up 8.3% since I brought it to you back on Jan. 6. IGM trades at roughly $136.50, with a 0.48% expense ratio.

Tech Wealth Gem No. 2
The best proxy for small caps is the iShares Russell 2000 ETF (NYSE Arca: IWM), which seeks to reflect the Russell 2000 index of small-cap firms. IWM holds such notable tech stocks as chip firms Advanced Micro Devices Inc. (Nasdaq: AMD) and Microsemi Corp. (Nasdaq: MSCC) and software firm Aspen Technology Inc. (Nasdaq: AZPN). IWM trades at roughly $136, with a 0.2% fee for expenses.

Tech Wealth Gem No. 3
The First Trust Cloud Computing ETF (Nasdaq: SKYY) is after a massive market. According to Statista.com, cloud computing has grown at a 16% yearly clip in the past five years. And Gartner Group says that $111 billion in tech spending was earmarked for the cloud in 2016 – a number that will hit $216 billion by 2020. Its holdings include Amazon, NetApp Inc. (Nasdaq: NTAP), and Netflix.com Inc. (Nasdaq: NFLX). Trading at just $38, SKYY has a 0.6% expense ratio. Last year, the fund gained nearly 20%; it’s up 7.4% since we first looked at it earlier this year, and it’s averaged profits of 15.4% over the past five years.

Of course, if these three ETFs aren’t appealing and you want to do some looking on your own, you’ll want to protect yourself. And that’s why I’ve put together these three ETF Profit Screens…

Do They Pass These Tests?

ETF Profit Screen No. 1: Expense Ratio
ETFs have gained so much popularity because of their low overhead compared to mutual funds, some of which can have management fees of 5%.

For my money, I rarely buy an ETF with an expense ratio above 1% – and I prefer 0.5% or even lower.

If you’re considering two ETFs with similar ratings and performance, then choose the “cheaper” one. For instance, a semiconductor ETF with an expense ratio of 1% has double the overhead of one whose expense ratio is 0.5%.

ETF Profit Screen No. 2: Morningstar Rating
Founded in 1984, Morningstar is a leading provider of independent investment research. It covers roughly 525,000 stocks, mutual funds, and ETFs.

The firm assigns one to five stars to each of the investments it covers. I avoid ETFs with less than three stars because I believe the quality of the fund is more important than volume.

My broker automatically gives me the Morningstar rating for each ETF I screen. If your broker doesn’t, don’t worry. You can get it for free directly from Morningstar’s website.

ETF Profit Screen No. 3: Trend
Wall Street’s fickle nature means that certain sectors will be in or out of favor at any point in time. In other words, don’t buy an ETF in a sector that the sharks are circling.

That said, you should consider the long haul. You can find great bargains in sectors that are temporarily out of favor. You just have to have the confidence to stay with the trend through the ups and downs.

Of course, neither the “Trump rally” nor this bull market will last forever. And I’ll be back soon with some ways to make sure you profit no matter what happens.

In the meantime, enjoy this ride on the road to wealth.

See you soon.

Follow me on Facebook and Twitter.

Related Reports:

Strategic Tech Investor: The Road to Wealth Is Paved by TechStrategic Tech Investor: This Is the Bull Market Your Kids Will Be Talking AboutStrategic Tech Investor: Despite What This “King” Says, Trump’s Plan Will Inflate These Tech Plays

Join the conversation. Click here to jump to comments…

Michael A. Robinson
Michael A. Robinson

About the Author

Browse Michael A.’s articles | View Michael A.’s research services

Michael A. Robinson is one of the top financial analysts working today. His book “Overdrawn: The Bailout of American Savings” was a prescient look at the anatomy of the nation’s S&L crisis, long before the word “bailout” became part of our daily lexicon. He’s a Pulitzer Prize-nominated writer and reporter, lauded by the Columbia Journalism Review for his aggressive style. His 30-year track record as a leading tech analyst has garnered him rave reviews, too. Today he is the editor of the monthly tech investing newsletter Nova-X Report as well as Radical Technology Profits, where he covers truly radical technologies ones that have the power to sweep across the globe and change the very fabric of our lives and profit opportunities they give rise to. He also explores “what’s next” in the tech investing world at Strategic Tech Investor.

… Read full bio

Buy State Bank of India; target of Rs 328: HDFC Securities

HDFC Securities’ research report on State Bank of India

Petronet LNG (PLNG) reported strong numbers in 4QFY18. EBITDA came in at Rs 8.22bn (+33.4% YoY), led by higher volumes. Company delivered total volumes of 213tbtu (~4.17mmt), up 18.4% YoY. APAT was at Rs 5.23bn (+11% YoY), owing to higher tax rate at 33.9% compared to 23.9% in 4QFY17. Tax rate was lower in 4QFY17 due to benefits accruing from investment allowance reserve policy. As per the policy, companies are allowed to deduct certain costs pertaining to investments from tax. Kochi terminal utilisation is expected to increase from 12% in FY18 to 34% in FY20 with increase in LNG offtake post completion of Kochi-Mangalore pipeline by Dec-18. Anchor customers OMPL, MFL are equipped to receive LNG. MRPL is expected to receive LNG by Mar19 by slightly tweaking its facilities.

Outlook

A relatively low re-gasification tariff compared to competitors (~20% lower Regas tariff compared to Dabhol terminal), well-connected terminals and tied up capacity with off-takers ensures healthy utilisation of PLNGs terminals, despite competition from new terminals. Our TP is Rs 304/sh (18x FY20E EPS). Maintain BUY.

For all recommendations report, click here

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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First Published on May 31, 2018 04:07 pm

IMF Bailout Looms For Pakistan as Debt Surge Raises Alarm

For many in Pakistan it’s a question of when — rather than if — the nation will go to the International Monetary Fund for financial support to pay its soaring foreign debt as reserves dwindle.

External debt and liabilities has increased 76 percent to 10.6 trillion rupees ($92 billion) since June 2013, taking the ratio up to 31 percent of gross domestic product, the highest in almost six years. Pakistan’s debt will continue to grow as it has the highest financing need as a percentage of GDP in emerging markets over the next two years, according to IMF projections.

Rising Share

Pakistan's external debt surges to highest in almost six years

Source: State Bank of Pakistan

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It’s not an unusual situation for Pakistan, which has gone through decades of debt blowouts and balance-of-payment imbalances. South Asia’s second-largest economy has received 12 IMF bailouts since the late 1980s and completed its last loan program just two years ago.

The nation is once again facing a crunch after foreign-exchange reserves dropped to the lowest in more than three years, forcing authorities to devalue the currency twice in recent months and hike interest rates. To help repay debts and keep the economy going, another IMF loan is possibly the next step.

“It’s a familiar situation,” said Yousuf Nazar, a former Citigroup Inc. banker and author of The Gathering Storm: Pakistan. “We have rising debt servicing and faltering growth — the short-term solution is the IMF, it’s probably a matter of months.”

Financing Need

Pakistan tops list of emerging markets and mid-income economies

Source: International Monetary Fund forecast

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Pakistan’s economic picture was generally rosy up until the past year. The current government, which will hand over to a caretaker administration on Friday ahead of July 25 elections, has managed to boost economic growth to its highest level in a decade. That was aided in part by low oil prices, the completion of a $6.6 billion IMF program in September 2016 and the Chinese financing of about $60 billion in infrastructure across the country as part of Beijing’s flagship Belt and Road initiative.

The growth boom has come with rising imports of Chinese machinery and other goods, widening Pakistan’s current-account deficit by 50 percent this year. Added to that is Islamabad’s mounting debt to Beijing and questions over how it will eventually repay billions of dollars over the medium to long term.

Surging oil prices are making matters worse. The central bank recently warned that “the balance of payments has further deteriorated” because of rising crude and investor inflows remaining limited.

Yet the ruling Pakistan Muslim League-Nawaz party, which will face a heated election battle against its main opposition rival and former cricket star Imran Khan, has continually denied that it will need to go to the IMF for help. Finance ministry officials didn’t respond to calls seeking comment.

The government is instead borrowing more. It plans to raise 1.1 trillion rupees of foreign debt in the fiscal year starting from July 1 compared with a budgeted 810.7 billion rupees. Major lending sources will be commercial banks, global bonds and China, according to finance ministry data.

External Cover

Pakistan's budgeted external borrowing surges

Source: Finance Ministry; Pakistan's fiscal year runs July-June

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Pakistan has already borrowed at least $1.2 billion from China and Middle Eastern banks since April to help bridge a $3 billion gap this financial year, junior Finance Minister Rana Muhammad Afzal Khan, said in an April interview.

“If you don’t take loans your growth will be the lowest, debt brings growth world over,” Prime Minister Shahid Khaqan Abbasi said in Islamabad this week.

In the next five months about $3 billion will need to be paid to creditors including the IMF, World Bank, Paris Club and China and the nation may try to reschedule some of those, said Vaqar Ahmed, the deputy executive director of the Sustainable Development Policy Institute in Islamabad.

Bank Loans

Pakistan's lending from commercial banks rise almost four times

Source: State Bank of Pakistan; Pakistan fiscal year runs July-June

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As such, Pakistan is close to bankruptcy and will need a bailout that may come from the IMF, said Asad Umar, the former chief executive officer of Engro Corp. — one of the nation’s largest conglomerates — who is now a senior politician in Khan’s party and pegged as the likely finance minister if they win the election.

“The pressure has started to come in the numbers now,” said Umair Naseer, an analyst at Topline Securities Pvt. in Karachi. “Avoiding an IMF loan program is very difficult.”

Debt Level

Highest government debt as percentage of GDP in Asia

Source: International Monetary Fund 2018 forecast

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Trade war? Here’s what investors should really be worried about

Stocks slumped Wednesday because investors were worried about new tariffs imposed on China by the United States.

But the biggest fear facing US investors shouldn’t be growing global trade tensions. It should be rising interest rates.

“The Fed is more likely to kill the bull market than a trade war,” said Emily Roland, head of capital markets research for John Hancock Investments.

The central bank raised interest rates twice this year and many experts predict two more hikes before the end of 2018. Several more increases are expected in 2019.

Roland noted that the Fed remains “data dependent” under new chief Jerome Powell, just as it was under his predecessors Alan Greenspan, Ben Bernanke and Janet Yellen.

In other words, the Fed isn’t going to act because of political news. It will make moves based on what’s going on in the economy, especially with regards to the job market and inflation.

That means that the Fed is likely to keep raising interest rates until there are firm signs of a slowdown. There aren’t too many just yet. But it also means that the Fed may help cause that slowdown.

Steady increases in the Fed’s key short-term rate will make it more expensive for companies and consumers to borrow money. That could eventually lead to a slowdown in sales and earnings growth for corporate America.

There’s another worry. The Fed’s benchmark federal funds rate is currently 2%. That’s not far below rates for longer-term US Treasury bonds like the 10-year and 30-year, which have yields of about 2.9% and 3%.

If the Fed keeps raising short-term rates and long-term rates don’t nudge higher, this gap could narrow further, creating what economists call a flattening yield curve.

There are even concerns that rates could flip. Short-term yields could wind up being higher than longer-term rates, a phenomenon known as an inverted yield curve.

Ryan Detrick, senior market strategist at LPL Research, points out that the yield curve has inverted each time before the last nine recessions.

Fear an inverted yield curve?

9 of the last 9 recessions started with one.

Here are the past 5 times it happened.

Notice that the economy didn't fall into a recession until 21 months later on average … t.co/aTDUnqrj5H pic.twitter.com/bvUXYkqWdI

— Ryan Detrick, CMT (@RyanDetrick) July 9, 2018

The yield curve may not wind up inverting. But the mere fact that it is flattening because of the Fed’s rate hikes could be enough to spook investors.

“Before trade wars were on anyone’s mind, the most common fear of investors was rising interest rates,” said Craig Birk, executive vice president of portfolio management with Personal Capital, an investment management firm, in a report this week.

“A flatter yield curve does create headwinds for growth, including less incentive for banks to lend,” Birk added.

The good news is that overall rates remain low. Birk said there’s a big difference between the Fed raising rates when they are at just 2% as opposed to about 5% before the 2007 Great Recession began and 6% at the height of the 1999 tech bubble, because there’s still a lot of room for rates to go up.

Still, John Hancock’s Roland said she’s a little nervous that the US economy may eventually slow because of rate hikes, even as many companies continue to get a boost from tax cuts in Washington. And any pullback in the US could bring down global growth.

“How long can the US prop up the rest of the world? It may not be for much longer,” Roland said.