We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
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.
3 Financial Stocks Benefiting From Fed Policy Shifts in 2025
Read MoreHide Full Article
Key Takeaways
Financial stocks have risen 9.1% YTD, outpacing the broader market in 2025.
Fed rate cut expectations and strong economic data boost sector outlook.
AB, IBKR and JHG flaunt improved earnings estimates and strong VGM Scores.
Financial stocks have recorded noteworthy gains in 2025. The S&P 500 Financial Select Sector SPDR ETF has outpaced the broader market, rising 9.1% as of July. This has been supported by solid economic indicators, regulatory tailwinds and renewed confidence in capital markets. In such an environment, stocks like AllianceBernstein Holding L.P. (AB - Free Report) , Interactive Brokers Group, Inc. (IBKR - Free Report) and Janus Henderson Group plc (JHG - Free Report) become viable investment options.
Major banking institutions have benefited from buoyant trading revenues, surging M&A activity and healthy bonus pools, signaling sustained profitability across the sector. These trends underscore that financials are not just riding a cyclical upswing but are boosted by a structurally favorable environment.
Anticipation of a September rate cut by the Fed has also fueled optimism. Geopolitically, while tariff uncertainties persist, the resilience shown by financials, due in part to their scale and diversified revenue streams, adds to their appeal as a defensive cyclical play.
Interest rate shifts by the Fed are especially important for this sector. When the Fed eases, borrowing costs fall, stimulating lending growth and boosting banks’ net interest margins. Conversely, higher rates can compress those margins and curb debt-finance activity. Yet, when interest rates are relatively high, banks and other financial institutions generally see increased profitability due to increased lending rates. The gap between such lending rates is considered a long-term asset for banks.
Also, financial stocks are very popular investments on their own. Most companies within the sector issue dividends and are judged on the overall strength of their financial health. It is thus prudent to add a few to one’s portfolio.
To summarize, this year, financial stocks present a compelling investment case, combining strong recent performance, favorable macroeconomic timing amid geopolitical friction and direct responsiveness to Fed policy. This offers both cyclical exposure and structural potential.
Our Choices
The stocks below flaunt a Zacks Rank #1 (Strong Buy) or Rank #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. You can see the complete list of today’s Zacks #1 Rank stocks here.
AllianceBernstein is a publicly owned investment manager. AB’s expected earnings growth rate for the current year is 2.2%. The Zacks Consensus Estimate for its current-year earnings has improved 11.4% over the past 60 days. This Zacks Rank #1 company has a VGM Score of B.
Interactive Brokers is an automated electronic broker. IBKR’s expected earnings growth rate for the current year is 11.4%. The Zacks Consensus Estimate for its current-year earnings has improved 4.4% over the past 60 days. This Zacks Rank #1 company has a VGM Score of B.
Janus Henderson is an asset management holding company. JHG’s expected earnings growth rate for the current year is 2.6%. The Zacks Consensus Estimate for its current-year earnings has improved 7.1% over the past 60 days. This Zacks Rank #1 company has a VGM Score of B.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
3 Financial Stocks Benefiting From Fed Policy Shifts in 2025
Key Takeaways
Financial stocks have recorded noteworthy gains in 2025. The S&P 500 Financial Select Sector SPDR ETF has outpaced the broader market, rising 9.1% as of July. This has been supported by solid economic indicators, regulatory tailwinds and renewed confidence in capital markets. In such an environment, stocks like AllianceBernstein Holding L.P. (AB - Free Report) , Interactive Brokers Group, Inc. (IBKR - Free Report) and Janus Henderson Group plc (JHG - Free Report) become viable investment options.
Major banking institutions have benefited from buoyant trading revenues, surging M&A activity and healthy bonus pools, signaling sustained profitability across the sector. These trends underscore that financials are not just riding a cyclical upswing but are boosted by a structurally favorable environment.
Anticipation of a September rate cut by the Fed has also fueled optimism. Geopolitically, while tariff uncertainties persist, the resilience shown by financials, due in part to their scale and diversified revenue streams, adds to their appeal as a defensive cyclical play.
Interest rate shifts by the Fed are especially important for this sector. When the Fed eases, borrowing costs fall, stimulating lending growth and boosting banks’ net interest margins. Conversely, higher rates can compress those margins and curb debt-finance activity. Yet, when interest rates are relatively high, banks and other financial institutions generally see increased profitability due to increased lending rates. The gap between such lending rates is considered a long-term asset for banks.
Also, financial stocks are very popular investments on their own. Most companies within the sector issue dividends and are judged on the overall strength of their financial health. It is thus prudent to add a few to one’s portfolio.
To summarize, this year, financial stocks present a compelling investment case, combining strong recent performance, favorable macroeconomic timing amid geopolitical friction and direct responsiveness to Fed policy. This offers both cyclical exposure and structural potential.
Our Choices
The stocks below flaunt a Zacks Rank #1 (Strong Buy) or Rank #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. You can see the complete list of today’s Zacks #1 Rank stocks here.
AllianceBernstein is a publicly owned investment manager. AB’s expected earnings growth rate for the current year is 2.2%. The Zacks Consensus Estimate for its current-year earnings has improved 11.4% over the past 60 days. This Zacks Rank #1 company has a VGM Score of B.
Interactive Brokers is an automated electronic broker. IBKR’s expected earnings growth rate for the current year is 11.4%. The Zacks Consensus Estimate for its current-year earnings has improved 4.4% over the past 60 days. This Zacks Rank #1 company has a VGM Score of B.
Janus Henderson is an asset management holding company. JHG’s expected earnings growth rate for the current year is 2.6%. The Zacks Consensus Estimate for its current-year earnings has improved 7.1% over the past 60 days. This Zacks Rank #1 company has a VGM Score of B.