An increase in interest rates can affect consumer spending by making borrowing more expensive. Growth stocks and businesses with high debt-to-equity ratios are under pressure in this environment. But a few shares on the ASX are built to endure, given their formidable balance sheets and diversified businesses.
There has been a larger interest in finding firms with predictable cash flow and easily replicable business models. It’s not about the short term, but the long-term performance. What’s the focus of the current cycle is on earning durability and disciplined capital allocation.
Global companies with repeat sales will be better equipped to deal with inflation and interest rate changes. Volatility in the markets indicates changes in interest rate expectations.
Interest rate shifts are reshaping investor strategies across global equity markets. [Courtesy: Financial Content]
Two ASX Shares Positioned For Resilience And Growth
In a rising-interest-rate environment, investors often look for businesses with durable earnings, strong balance sheets, and clear growth strategies. The two companies below demonstrate these qualities across different sectors and operating models.
- Lovisa Holdings: A fast-growing global jewellery retailer expanding its store network across multiple international markets, supported by strong revenue growth and a young customer base.
- Washington H. Soul Pattinson: A diversified investment house with exposure to energy, industrials, agriculture, telecommunications, and other defensive sectors, supported by disciplined capital allocation and portfolio flexibility.
1. Lovisa Holdings As A Global Growth Story
Lovisa Holdings is a dynamic jewellery retailer selling in several countries around the world. Australia, New Zealand, Singapore, Malaysia, South Africa, the UK, France, Germany, the Netherlands, Poland, Italy, the US, and Canada are its footprint territories. The firm is looking at a younger customer base that’s more likely to be less sensitive to increasing housing prices.
The number of stores was up 15.5% to 1,089 in the first half of FY26. Underlying revenue and net profit after tax increased 22.7% and 20.4%, respectively, to $498.1 million and $109.1 million.
Long-term scale benefits are provided by continued expansion. Lovisa’s growing store network is aiding global growth.
Lovisa’s international expansion continues despite macroeconomic uncertainty. [Courtesy: Inside Retail]
Why Lovisa May Withstand Rising Interest Rates
Generally, borrowers are more affected by interest rate increases than non-debt-driven consumers. Young people who do not have significant mortgage payments are typically in Lovisa’s customer base.
This population trend can decrease the sensitivity to rate fluctuations. In addition, the company’s store count continues to grow across the globe, which is helping revenue to go up even in the face of slowing or flattening comparable store sales.
International diversification also provides for a dispersion of economic risks by region. Resilience is achieved through strong operational execution and positioning.
They believe the business will be able to reap the rewards of scale, efficiency, and overall revenue growth in their global markets over the next five years. Retail strategies that focus on youth can lower rate sensitivity.
2. Washington H. Soul Pattinson As A Defensive Investment
Washington H. Soul Pattinson is a diversified investment house with exposure in a number of sectors. It has a diverse portfolio of energy, industrial properties, agriculture, telecommunication, credit, and swimming schools.
The company invests heavily in the ASX energy company, New Hope Corporation. Global supply disruption could lead to price strength in energy markets.
Diversification helps to even out earnings over the economic cycle. Active capital allocation decisions are possible in the group because of its structure.
Management may make investments or liquidate investments based on market opportunities. This flexibility will help ensure long-term resilience during periods of economic uncertainty.
Washington H. Soul Pattinson maintains a diversified multi-sector investment portfolio. [Courtesy: PCG Blog]
Financial Strength And Portfolio Flexibility Drive Returns
The core areas of long-term value creation are strong financing and strategic adaptability. The recent performances of Soul Pattinson demonstrate disciplined capital management and predictable performances across cycles.
- Net Cash Flow Growth: Net cash flow from investments rose 15.4% from a year earlier, indicating the strength of the business.
- Good asset returns: Pre-tax net asset value return was 9.7%, which helped portfolio performance.
- Shareholder Commitment: The interim dividend per share increased by 9.1%, indicating a commitment from shareholders.
- Capital Reallocation Advantage: As an investment firm, the company is able to rebalance its portfolio to take advantage of valuation opportunities.
- LT Compounding Focus: Portfolio flexibility and diversified exposure produce resilience in a rising interest rate and market uncertainty environment.
Long-Term Investment Outlook For Patient Investors
Businesses that have structural growth drivers may be attractive to investors looking to lock in during an interest rate rally. Lovisa provides international opportunities and demographic benefits.
Soul Patts offers diversified exposure and capital allocation expertise. Both companies are strategically disciplined and have scalable business models.
The short-term volatility may still continue, but long-term fundamentals are going to be the key. Performance can remain strong with earnings’ resilience and portfolio strength.
These ASX shares could appeal to investors with a long-term investment time horizon. They are investing in the markets because of consistency, diversification, and potential growth in the macroeconomic scenario.
Key Considerations Before Investing
In an increasing rate of interest climate, investors should consider factors beyond the short-term market changes and concentrate on the fundamentals when allocating capital. Through careful evaluation, you can help position investments towards your long-term financial objectives and risk tolerance.
- Measure Revenue Growth: sustained and steady revenue growth is indicative of long-term shareholder value. Macroeconomics can be counteracted by strong sales trends.
- Examine the strength of balance sheets: The lower the debt level, the more resilient the balance sheets will be in the face of higher borrowing rates.
- Review Competitive Positioning: Companies that have a clear competitive edge are more likely to be able to hold margins and to increase profits.
- Think Diversification: It can lessen volatility in a portfolio by investing in various industries when the economy is uncertain.
- Take a Long-Term View: Volatility can be caused by short-term interest rate changes, but often the long-term fundamentals are what will matter.
Also Read: 3 Super ASX Tech Stocks To Buy In May With $3,000
FAQs
Q1. Why Consider ASX Shares Amid Rising Interest Rates?
A1: Rising rates increase market volatility but can create opportunities. Companies with strong cash flows may remain resilient. Long-term investors often focus on fundamentals rather than short-term price movements.
Q2. What Makes Lovisa Holdings Attractive?
A2: Lovisa is expanding globally, with the store network rising 15.5% to 1,089. Revenue and profit growth support its expansion strategy and long-term scalability.
Q3. How Does Soul Pattinson Reduce Risk?
A3: Soul Pattinson maintains diversified investments across multiple sectors. Its flexibility allows capital reallocation, supporting stability during economic uncertainty and rate changes.
Q4. When Should Investors Consider These Shares?
A4: Long-term investors may evaluate these stocks during periods of market volatility. Consistent earnings growth and strategic positioning can support multi-year investment horizons.
Disclaimer
This article is for informational purposes only and does not constitute financial advice. It is based solely on publicly available summary information provided in the source material. Investors should conduct independent research and consider their financial circumstances before making investment decisions. Market conditions, interest rates, and company performance may change over time. Past performance does not guarantee future results. Professional financial advice is recommended where appropriate.
Source Links
- https://www.fool.com.au/2026/05/09/2-amazing-asx-shares-id-buy-amid-rising-interest-rates/
- https://www.lovisa.com.au/pages/investor-centre
- https://soulpatts.com.au/
