4 Financial Stocks May Thrive as Rates Disrupt Market

Interest rates have begun rising again, and this is bad news for most stocks, as companies’ borrowing costs increase, and as a higher discount rate means that the present value of expected future earnings declines. Additionally, rising bond yields make fixed income investments a more attractive alternative to equities. The big exception tends to be banking and other financial stocks, which normally enjoy greater profits as interest rates rise. In particular, these 4 financial firms appear especially well-positioned to profit from rising rates, according to Barron’s: banking giants Bank of America Corp. (BAC), JPMorgan Chase & Co. (JPM) and Wells Fargo & Co. (WFC), as well as discount broker Charles Schwab Corp. (SCHW). The table below summarizes the factors that should propel these stocks.