The Fed again has taken a tightening stance for monetary policy. Policymakers lifted the fed funds target range to 3.75%-4% last week -- and history suggests that more rate hikes are coming. Ahead of the rate move last week, Argus Fed Watcher Kevin Heal changed his forecast to two rate increases of 25 basis points each before the end of 2026. His rationale is that employment is surprisingly healthy while inflation has been obstinate and the bond market has agita. We do not expect that two rate hikes will derail earnings growth or stunt innovation. Kevin says that two increases should keep the Fed from falling out of step if inflationary shocks persist, while not over-medicating the economy if inflation moderates. In sum, the economy is still strong and the Fed is doing its job by trying to keep inflation in check. Given the return to tightening monetary policy, we are looking at industries and companies that can do well during a period of higher interest rates. All of the following stocks carry Argus BUY ratings.

Lowe's is the second-largest home improvement retailer globally, with 1,761 stores in the US, after the 2023 divestiture of its Canadian locations. The firm’s stores offer products and services for home decorating, maintenance, repair, and remodeling, with maintenance and repair accounting for two-thirds of products sold. Lowe's primarily targets retail do-it-yourself (more than 60% of sales) and do-it-for-me customers, but has expanded its professional business clients to more than 30% from less than 20% in the past seven years (set to expand further with growth of FBM locations). We estimate Lowe's captures a high-single-digit share of the domestic home improvement market, based on US Census data and management’s market size estimates.

This pick list highlights constituents of the Morningstar US Large Cap Index that we believe offer investors the best risk-adjusted return prospects. Stocks of large-cap companies where neither growth nor value characteristics predominate. Stocks in the top 70% of the capitalization of the U.S. equity market are defined as large cap.

In our list this week, we review some of the top holdings in the Argus Model Portfolios. Our portfolio managers strive to achieve the best mix of stocks for the highest returns while adhering to the mandates of each portfolio. Our portfolios are thus dynamic, but intended for long-term gains. As such, the holdings generally turn over twice per year to allow the stocks time to grow according to our outlook. Our model portfolios were the topic of our September webinar. Each portfolio manager reviewed the mandate of their portfolio and described the criteria for stock picking and overall portfolio management. The following are some of the current top holdings in our major portfolios.