We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
4 Financial Stocks to Buy as Interest Rates Stay Higher for Longer
Read MoreHide Full Article
The Federal Reserve started raising interest rates in March 2022 to fight four-decades-high inflation and continued on the path for 10 straight policy meetings. It last raised rates in July 2023 for the 11th time, having announced a pause in June. Economic indicators from various sectors at that juncture were suggesting that the Fed’s tight monetary policy decisions were taking effect. Inflation numbers were also indicating a gradual slowdown. However, the cheer was short-lived.
Following a spike in August and September inflation metrics due to fuel prices and robust numbers from various sectors led by the jobs market, the general consensus has been that the Fed officials might have to revert to policy tightening. This is because inflation, albeit down from historic levels, is still above the Fed’s target rate of 2%.
Fed Chair Jerome Powell, in a speech given to the Economic Club of New York in October, stressed that while it was likely that the central bank would keep the interest rate unchanged at the current 22-year high level of 5.25-5.50% in its November meeting, it was not beyond the realms of imagination that they would have to raise rates further going forward if inflation continued to remain hot.
"Doing too little could allow above-target inflation to become entrenched and ultimately require monetary policy to wring more persistent inflation from the economy at a high cost to employment," he said. "Doing too much could also do unnecessary harm to the economy."
Also, actual rate cuts are not expected before the end of 2024. Interest rates are going to remain higher for longer, regardless of whether there are any hikes.
When interest rates are high, banks and other financial institutions generally see higher profitability due to increased lending rates. The gap between such lending rates is considered a long-term asset for banks. Also, short-term liabilities such as deposits boost net interest margins. Stocks of banks, insurance companies and other financial institutions go up with continuous interest rate hikes.
For the same reason, financial stocks provide much-required growth in a market where interest rate hikes are expected to continue or are likely to remain high. Astute investors should consider such stocks at present. Hence, we have selected four stocks that we believe would be gaining ground in the ensuing months and should be looked into now. The stocks below flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy). The search was also narrowed down with a VGM Score of A or B. Here V stands for Value, G for Growth and M for Momentum; the score is a weighted combination of these three metrics. Such a score allows you to eliminate the negative aspects of stocks and select winners.
JPMorgan Chase & Co. (JPM - Free Report) is a global financial services company and one of the largest banks in the United States.
JPM’s expected earnings growth rate for the current year is 37.7%. The Zacks Consensus Estimate for its current-year earnings has improved 3.6% over the past 60 days. The company has a Zacks Rank #1 and a VGM Score of B. You can see the complete list of today’s Zacks #1 Rank stocks here.
RenaissanceRe Holdings Ltd. (RNR - Free Report) is an insurance and reinsurance company operating in the United States and globally.
RNR’s expected earnings growth rate for the current year is 332.9%. The Zacks Consensus Estimate for its current-year earnings has improved 11.5% over the past 60 days. The company has a Zacks Rank #2 and a VGM Score of B.
AerCap Holdings N.V. (AER - Free Report) is a global company engaged in leasing, financing and managing commercial flight equipment.
AER’s expected earnings growth rate for the current year is 11.2%. The Zacks Consensus Estimate for its current-year earnings has improved 3.7% over the past 60 days. The company has a Zacks Rank #1 and a VGM Score of A.
W. R. Berkley Corporation (WRB - Free Report) is a property and casual insurance holding company operating in the commercial lines segment.
WRB’s expected earnings growth rate for the current year is 8.2%. The Zacks Consensus Estimate for its current-year earnings has improved 3.5% over the past 60 days. The company has a Zacks Rank #2 and a VGM Score of B.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
4 Financial Stocks to Buy as Interest Rates Stay Higher for Longer
The Federal Reserve started raising interest rates in March 2022 to fight four-decades-high inflation and continued on the path for 10 straight policy meetings. It last raised rates in July 2023 for the 11th time, having announced a pause in June. Economic indicators from various sectors at that juncture were suggesting that the Fed’s tight monetary policy decisions were taking effect. Inflation numbers were also indicating a gradual slowdown. However, the cheer was short-lived.
Following a spike in August and September inflation metrics due to fuel prices and robust numbers from various sectors led by the jobs market, the general consensus has been that the Fed officials might have to revert to policy tightening. This is because inflation, albeit down from historic levels, is still above the Fed’s target rate of 2%.
Fed Chair Jerome Powell, in a speech given to the Economic Club of New York in October, stressed that while it was likely that the central bank would keep the interest rate unchanged at the current 22-year high level of 5.25-5.50% in its November meeting, it was not beyond the realms of imagination that they would have to raise rates further going forward if inflation continued to remain hot.
"Doing too little could allow above-target inflation to become entrenched and ultimately require monetary policy to wring more persistent inflation from the economy at a high cost to employment," he said. "Doing too much could also do unnecessary harm to the economy."
Also, actual rate cuts are not expected before the end of 2024. Interest rates are going to remain higher for longer, regardless of whether there are any hikes.
When interest rates are high, banks and other financial institutions generally see higher profitability due to increased lending rates. The gap between such lending rates is considered a long-term asset for banks. Also, short-term liabilities such as deposits boost net interest margins. Stocks of banks, insurance companies and other financial institutions go up with continuous interest rate hikes.
For the same reason, financial stocks provide much-required growth in a market where interest rate hikes are expected to continue or are likely to remain high. Astute investors should consider such stocks at present. Hence, we have selected four stocks that we believe would be gaining ground in the ensuing months and should be looked into now. The stocks below flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy). The search was also narrowed down with a VGM Score of A or B. Here V stands for Value, G for Growth and M for Momentum; the score is a weighted combination of these three metrics. Such a score allows you to eliminate the negative aspects of stocks and select winners.
JPMorgan Chase & Co. (JPM - Free Report) is a global financial services company and one of the largest banks in the United States.
JPM’s expected earnings growth rate for the current year is 37.7%. The Zacks Consensus Estimate for its current-year earnings has improved 3.6% over the past 60 days. The company has a Zacks Rank #1 and a VGM Score of B. You can see the complete list of today’s Zacks #1 Rank stocks here.
RenaissanceRe Holdings Ltd. (RNR - Free Report) is an insurance and reinsurance company operating in the United States and globally.
RNR’s expected earnings growth rate for the current year is 332.9%. The Zacks Consensus Estimate for its current-year earnings has improved 11.5% over the past 60 days. The company has a Zacks Rank #2 and a VGM Score of B.
AerCap Holdings N.V. (AER - Free Report) is a global company engaged in leasing, financing and managing commercial flight equipment.
AER’s expected earnings growth rate for the current year is 11.2%. The Zacks Consensus Estimate for its current-year earnings has improved 3.7% over the past 60 days. The company has a Zacks Rank #1 and a VGM Score of A.
W. R. Berkley Corporation (WRB - Free Report) is a property and casual insurance holding company operating in the commercial lines segment.
WRB’s expected earnings growth rate for the current year is 8.2%. The Zacks Consensus Estimate for its current-year earnings has improved 3.5% over the past 60 days. The company has a Zacks Rank #2 and a VGM Score of B.