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4 Financial Stocks to Bet on as Sector Momentum Builds
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Key Takeaways
The S&P 500 Financial Select Sector ETF is up 11.5% in 2025, reflecting sector-wide strength.
Easing Fed policy, firm earnings and tech-driven efficiency are fueling the financials rally.
Goldman Sachs, HCI Group, Interactive Brokers and Janus Henderson show solid earnings upgrades.
Financial stocks have delivered strong performance in 2025, with the S&P 500 Financial Select Sector SPDR ETF advancing 11.5% as of Oct. 27. The uptrend reflects robust economic momentum, supportive regulatory conditions and renewed investor confidence in capital markets. In such an environment, stocks like The Goldman Sachs Group, Inc. (GS - Free Report) , HCI Group, Inc. (HCI - Free Report) , Interactive Brokers Group, Inc. (IBKR - Free Report) and Janus Henderson Group plc (JHG - Free Report) become viable investment options.
The sector’s impressive performance stems from a combination of supportive monetary trends, solid earnings fundamentals and improved investor sentiment. After two years of elevated interest rates, banks began to benefit from healthier net interest margins as the yield curve normalized. Borrowing costs for consumers and businesses remained manageable, while the rates banks paid on deposits stabilized, helping lenders sustain profitability.
Investor confidence rose further as markets increasingly anticipated a gradual shift in Fed policy. The expectation of measured rate cuts reduced funding pressure and volatility in money markets, providing a smoother environment for financial institutions. This moderation in monetary tightening also alleviated fears of a hard landing for the U.S. economy, lifting the outlook for credit quality and lowering risk premiums across the sector.
Policy and regulatory expectations have also played a role. The market has largely priced in a more pragmatic regulatory tone. This reassured investors that banks would retain adequate capital while being able to reward shareholders through dividends and buybacks. Simultaneously, financial institutions deepened their investment in digital technology and artificial intelligence, driving efficiency gains in areas such as compliance, risk management and customer service. These structural shifts positioned the industry for long-term margin improvement.
Outlook remains cautiously optimistic. Profitability is likely to stay firm as funding costs decline faster than lending yields compress. However, much depends on the pace of economic growth and the Fed’s ability to engineer a soft landing. If rate cuts are too aggressive or growth slows sharply, net interest margins could narrow and credit demand may weaken. Even so, the sector enters this phase with stronger balance sheets, diversified income sources and a renewed focus on operational efficiency. These are factors that make it better prepared to weather the next stage of the economic cycle.
To summarize, this year, financial stocks present a compelling investment case, combining strong recent performance, favorable macroeconomic timing 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.
Goldman Sachs is a financial services provider. GS’ expected earnings growth rate for the current year is 19.8%. The Zacks Consensus Estimate for its current-year earnings has improved 6.5% over the past 60 days. This Zacks Rank #2 company has a VGM Score of B.
HCI Group is an insurance, real estate and information technology company. HCI’s expected earnings growth rate for the current year is 4.7%. The Zacks Consensus Estimate for its current-year earnings has improved 130.5% over the past 60 days. This Zacks Rank #2 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 14.8%. The Zacks Consensus Estimate for its current-year earnings has improved 3.6% 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 6.5%. The Zacks Consensus Estimate for its current-year earnings has improved 3% over the past 60 days. This Zacks Rank #1 company has a VGM Score of B.
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4 Financial Stocks to Bet on as Sector Momentum Builds
Key Takeaways
Financial stocks have delivered strong performance in 2025, with the S&P 500 Financial Select Sector SPDR ETF advancing 11.5% as of Oct. 27. The uptrend reflects robust economic momentum, supportive regulatory conditions and renewed investor confidence in capital markets. In such an environment, stocks like The Goldman Sachs Group, Inc. (GS - Free Report) , HCI Group, Inc. (HCI - Free Report) , Interactive Brokers Group, Inc. (IBKR - Free Report) and Janus Henderson Group plc (JHG - Free Report) become viable investment options.
The sector’s impressive performance stems from a combination of supportive monetary trends, solid earnings fundamentals and improved investor sentiment. After two years of elevated interest rates, banks began to benefit from healthier net interest margins as the yield curve normalized. Borrowing costs for consumers and businesses remained manageable, while the rates banks paid on deposits stabilized, helping lenders sustain profitability.
Investor confidence rose further as markets increasingly anticipated a gradual shift in Fed policy. The expectation of measured rate cuts reduced funding pressure and volatility in money markets, providing a smoother environment for financial institutions. This moderation in monetary tightening also alleviated fears of a hard landing for the U.S. economy, lifting the outlook for credit quality and lowering risk premiums across the sector.
Policy and regulatory expectations have also played a role. The market has largely priced in a more pragmatic regulatory tone. This reassured investors that banks would retain adequate capital while being able to reward shareholders through dividends and buybacks. Simultaneously, financial institutions deepened their investment in digital technology and artificial intelligence, driving efficiency gains in areas such as compliance, risk management and customer service. These structural shifts positioned the industry for long-term margin improvement.
Outlook remains cautiously optimistic. Profitability is likely to stay firm as funding costs decline faster than lending yields compress. However, much depends on the pace of economic growth and the Fed’s ability to engineer a soft landing. If rate cuts are too aggressive or growth slows sharply, net interest margins could narrow and credit demand may weaken. Even so, the sector enters this phase with stronger balance sheets, diversified income sources and a renewed focus on operational efficiency. These are factors that make it better prepared to weather the next stage of the economic cycle.
To summarize, this year, financial stocks present a compelling investment case, combining strong recent performance, favorable macroeconomic timing 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.
Goldman Sachs is a financial services provider. GS’ expected earnings growth rate for the current year is 19.8%. The Zacks Consensus Estimate for its current-year earnings has improved 6.5% over the past 60 days. This Zacks Rank #2 company has a VGM Score of B.
HCI Group is an insurance, real estate and information technology company. HCI’s expected earnings growth rate for the current year is 4.7%. The Zacks Consensus Estimate for its current-year earnings has improved 130.5% over the past 60 days. This Zacks Rank #2 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 14.8%. The Zacks Consensus Estimate for its current-year earnings has improved 3.6% 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 6.5%. The Zacks Consensus Estimate for its current-year earnings has improved 3% over the past 60 days. This Zacks Rank #1 company has a VGM Score of B.