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.
3 Financial Stocks to Buy in the Current Environment
Read MoreHide Full Article
To control inflation, the Fed raised interest rates for 10 straight policy meetings before finally opting for a rate pause in June 2023. It barely raised rates till the end of 2023 and promised at least three rate cuts in 2024. However, it is only in September of this year that we are finally going to see the first slashing of rates.
Fed Chair Jerome Powell has continued to suggest that he is fairly certain of rate cuts this year, but the Fed would embark on that journey only after reviewing further data. From his recent remarks, as well as comments made by other Fed officials, it is now amply evident that the inflation level is at the mark that the Fed wants it to be at. That also indicates that we are going to witness the much awaited rate cuts from September itself. In fact, it is the extent of the rate cuts that is currently being debated.
While a September rate cut is almost a certainty, the Fed has resisted committing to further cuts as of now. Yet, with both consumer and producer-side inflation coming in line with expectations, investor mood has been upbeat about the Fed bringing down rates more than expected earlier. Per CME’s FedWatch tool, there is a 69% likelihood that the Fed would announce a 50 basis point cut from its meeting.
This, however, does not indicate that interest rates are not going to come down rapidly. It merely addresses the problem of immediate relief needed by consumers. In reality, if rates fall by 50 basis points and are held at a target rate of 475-500, it is still pretty high. 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 increase and boost net interest margins.
Stocks of banks, insurance companies and other financial institutions go up with continuous interest rate hikes. This is because financial services companies can earn more on the money they have and on the credit they issue to their customers. As a result, the S&P 500 Financials Select Sector SPDR (XLF) soared 10.1% year to date as of June 30.
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 that one adds a few to their portfolio.
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.
Canadian Imperial Bank of Commerce (CM - Free Report) is a diversified financial institution that provides various financial products and services. CM’s expected earnings growth rate for the current year is 7.6%. The Zacks Consensus Estimate for its current-year earnings has improved 6.1% over the past 60 days. This Zacks Rank #1 company has a VGM Score of B.
Barclays PLC (BCS - Free Report) is a global financial services company. BCS’ expected earnings growth rate for the current year is 21.7%. The Zacks Consensus Estimate for its current-year earnings has improved 4.4% over the past 60 days. This Zacks Rank #2 company has a VGM Score of B.
Arch Capital Group Ltd. (ACGL - Free Report) is a global insurance, reinsurance and mortgage insurance products company. ACGL’s expected earnings growth rate for the current year is 6.6%. The Zacks Consensus Estimate for its current-year earnings has improved 5% over the past 60 days. This Zacks Rank #2 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 to Buy in the Current Environment
To control inflation, the Fed raised interest rates for 10 straight policy meetings before finally opting for a rate pause in June 2023. It barely raised rates till the end of 2023 and promised at least three rate cuts in 2024. However, it is only in September of this year that we are finally going to see the first slashing of rates.
Fed Chair Jerome Powell has continued to suggest that he is fairly certain of rate cuts this year, but the Fed would embark on that journey only after reviewing further data. From his recent remarks, as well as comments made by other Fed officials, it is now amply evident that the inflation level is at the mark that the Fed wants it to be at. That also indicates that we are going to witness the much awaited rate cuts from September itself. In fact, it is the extent of the rate cuts that is currently being debated.
While a September rate cut is almost a certainty, the Fed has resisted committing to further cuts as of now. Yet, with both consumer and producer-side inflation coming in line with expectations, investor mood has been upbeat about the Fed bringing down rates more than expected earlier. Per CME’s FedWatch tool, there is a 69% likelihood that the Fed would announce a 50 basis point cut from its meeting.
This, however, does not indicate that interest rates are not going to come down rapidly. It merely addresses the problem of immediate relief needed by consumers. In reality, if rates fall by 50 basis points and are held at a target rate of 475-500, it is still pretty high. 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 increase and boost net interest margins.
Stocks of banks, insurance companies and other financial institutions go up with continuous interest rate hikes. This is because financial services companies can earn more on the money they have and on the credit they issue to their customers. As a result, the S&P 500 Financials Select Sector SPDR (XLF) soared 10.1% year to date as of June 30.
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 that one adds a few to their portfolio.
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.
Canadian Imperial Bank of Commerce (CM - Free Report) is a diversified financial institution that provides various financial products and services. CM’s expected earnings growth rate for the current year is 7.6%. The Zacks Consensus Estimate for its current-year earnings has improved 6.1% over the past 60 days. This Zacks Rank #1 company has a VGM Score of B.
Barclays PLC (BCS - Free Report) is a global financial services company. BCS’ expected earnings growth rate for the current year is 21.7%. The Zacks Consensus Estimate for its current-year earnings has improved 4.4% over the past 60 days. This Zacks Rank #2 company has a VGM Score of B.
Arch Capital Group Ltd. (ACGL - Free Report) is a global insurance, reinsurance and mortgage insurance products company. ACGL’s expected earnings growth rate for the current year is 6.6%. The Zacks Consensus Estimate for its current-year earnings has improved 5% over the past 60 days. This Zacks Rank #2 company has a VGM Score of B.