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3 Financial Stocks to Buy on a Slowdown in 2025 Rate Cuts
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The Fed cut rates by 25 basis points (bps) at its December meeting, marking a third consecutive cut. This follows a 25 bp cut in November and a 50 bp cut in September. The September cut was the first in over four years, signaling a shift in the Fed’s priorities in policy-making.
However, Fed Chair Jerome Powell warned at the conclusion of the December Fed meet that the central bank is currently projecting no more than two instances of rate reductions in 2025. This is a departure from the Fed’s September outlook, which had promised at least four cuts in the new year.
This indicates that interest rates are not going to come down rapidly. 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, short-term liabilities such as deposits increase and boost net interest margins.
Bank stocks, insurance companies and other financial institutions go up with continuous interest rate hikes. This is because financial services companies can earn more on their money and the credit they issue to their customers.
The sector has been a strong performer in 2024, delivering solid returns. Early concerns in the year about the collapse of several small to mid-cap banks were overshadowed by optimism about an improving economy and lower borrowing costs. As a result, the S&P 500 Financials Select Sector SPDR (XLF) soared 30.4% year to date as of Dec. 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 to add a few to one’s 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.
Banco BBVA Argentina S.A. (BBAR - Free Report) is a banking products and services company based in Argentina. BBAR’s expected earnings growth rate for the current year is 10.2%. The Zacks Consensus Estimate for its current-year earnings has improved 3.2% over the past 60 days. This Zacks Rank #1 company has a VGM Score of A.
NatWest Group plc (NWG - Free Report) is a banking and financial products and services company. NWG’s expected earnings growth rate for the current year is 4.1%. The Zacks Consensus Estimate for its current-year earnings has improved 3.3% over the past 60 days. This Zacks Rank #1 company has a VGM Score of B.
Fidelity National Financial, Inc. (FNF - Free Report) is an insurance products company. FNF’s expected earnings growth rate for the current year is 28.7%. The Zacks Consensus Estimate for its next-year earnings has improved 10% over the past 60 days. This Zacks Rank #2 company has a VGM Score of B.
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3 Financial Stocks to Buy on a Slowdown in 2025 Rate Cuts
The Fed cut rates by 25 basis points (bps) at its December meeting, marking a third consecutive cut. This follows a 25 bp cut in November and a 50 bp cut in September. The September cut was the first in over four years, signaling a shift in the Fed’s priorities in policy-making.
However, Fed Chair Jerome Powell warned at the conclusion of the December Fed meet that the central bank is currently projecting no more than two instances of rate reductions in 2025. This is a departure from the Fed’s September outlook, which had promised at least four cuts in the new year.
This indicates that interest rates are not going to come down rapidly. 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, short-term liabilities such as deposits increase and boost net interest margins.
Bank stocks, insurance companies and other financial institutions go up with continuous interest rate hikes. This is because financial services companies can earn more on their money and the credit they issue to their customers.
The sector has been a strong performer in 2024, delivering solid returns. Early concerns in the year about the collapse of several small to mid-cap banks were overshadowed by optimism about an improving economy and lower borrowing costs. As a result, the S&P 500 Financials Select Sector SPDR (XLF) soared 30.4% year to date as of Dec. 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 to add a few to one’s 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.
Banco BBVA Argentina S.A. (BBAR - Free Report) is a banking products and services company based in Argentina. BBAR’s expected earnings growth rate for the current year is 10.2%. The Zacks Consensus Estimate for its current-year earnings has improved 3.2% over the past 60 days. This Zacks Rank #1 company has a VGM Score of A.
NatWest Group plc (NWG - Free Report) is a banking and financial products and services company. NWG’s expected earnings growth rate for the current year is 4.1%. The Zacks Consensus Estimate for its current-year earnings has improved 3.3% over the past 60 days. This Zacks Rank #1 company has a VGM Score of B.
Fidelity National Financial, Inc. (FNF - Free Report) is an insurance products company. FNF’s expected earnings growth rate for the current year is 28.7%. The Zacks Consensus Estimate for its next-year earnings has improved 10% over the past 60 days. This Zacks Rank #2 company has a VGM Score of B.