Beating the Fed: 3 Must-Own Stocks if Interest Rates Stay Put in 2024

The financial sector has a complex relationship with interest rates. This makes the weakening prospect of United States Federal Reserve rate cuts a prospective opportunity for investors buying the stocks of leading domestic banks. 

Recent figures from the U.S. Labor Department showed that the Consumer Price Index (CPI) grew 3.5% over the 12 months. This led to March, outpacing both expectations and the 3.2% rate of inflation recorded in February. 

The rising price of both essentials and luxuries like fuel, housing, clothing, and dining out has hit consumers hard. The increase came in slightly above the 3.4% expected. This presents a significant problem in the ongoing battle to slow the effects of inflation. 

Analysts have warned that these confounding figures are likely to mean that the Fed is less likely to lower interest rates in the foreseeable future. This means that consumers will have to live with high-for-longer rates. 

While high interest rates are generally bad for Wall Street, the financial sector generally performs well when rates are higher. Stocks pertaining to banks, insurance firms, brokerage firms, and wealth managers can outperform the wider market. This is due to the higher cost of borrowing and rate of returns that can be offered for savings accounts. 

This means that banking stocks may be a solid option should the Fed refrain from making cuts in 2024. Should this scenario play out, the following three stocks may offer exceptional value: 

Stocks to Buy if Interest Rates Stay Put: Goldman Sachs (GS)

One of the most impressive performers from the financial sector so far in 2024 is Goldman Sachs (NYSE:GS). The stock has experienced steady growth following a 28% jump in profits for the first quarter of 2024. 

The stock posted 7.5% growth in Q1 2024 and posted net earnings of $4.13 billion for the quarter. This represents a strong increase one the $3.23 billion reported one year prior. 

Earnings per share also climbed to $11.58. This represnets a rise of nearly one-third from $8.79 in the first quarter of 2023. 

What’s driving this outperformance? The primary cause of Goldman’s impressive growth stems from investment banking fees, its fixed income, currency, and commodities arm, and its equities division. 

Although shifting expectations over the investment landscape are likely to bring some volatility to some of Goldman’s products, the firm’s Marcus savings account, which is designed to offer no fees on savings accounts and certificates of deposit (CDs) and yields of 4.4% could help the stock to thrive as more investors look to protect their wealth in inflation-beating accounts. 

Backed by impressive earnings and a solid product, Goldman Sachs is likely to continue its outperformance on Wall Street. This is true even if the Federal Reserve decides against rate cuts in 2024. 

JPMorgan Chase (JPM)

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Another stock that’s posted some impressive growth on Wall Street in Q1 2024 is JPMorgan Chase (NYSE:JPM). 

The stock accelerated to 16.4% growth in the first quarter. This was before a more uncertain outlook delivered a market correction at the beginning of Q2. 

The bank also posted impressive increases in net income for the first quarter. They had $13.4 billion arriving at a growth rate of 6% from Q1 2023.

So what caused the stock’s recent decline on Wall Street? According to JPMorgan’s guidance for net interest income, the firm’s earnings from the current high-interest environment were underwhelming for investors. As a result, the stock fell 6.5% in one day, representing its biggest daily dip since June 2020. 

While these net interest income figures are certainly a cause for concern at a time when it should be a leading driver of growth, the changing expectations for Federal Reserve rate cuts are likely to see more investors flow back into high-interest savings accounts in greater volumes as confounding inflation figures continue to impact Wall Street investing. In this case, JPMorgan serves as an excellent opportunity for investors to buy the stock, which has posted strong growth of 60% over the past five years, at a credible discount. 

Bank of America (BAC)

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We can see another mixed outlook that could be boosted by the high interest rate climate for Bank of America (NYSE:BAC). 

The bank reported a decline in profit for the first quarter of 2024 due to the lender allocating more money to cover souring loans, but overall BOA managed to exceed estimates thanks to its growing investment banking fees. 

These fees have been down to the relative strength of the US economy, as well as strong equities and a series of large-scale deals that have improved optimism for an overall revival in dealmaking. 

Bank of America managed to post double-digit growth on Wall Street in Q1 2024 and appears well-positioned to continue performing well as higher-for-longer interest rates appear increasingly likely. 

According to its first quarter performance, net interest income for Bank of America, which counts the money earned from loans and investments and what’s paid to customers for their deposits, was $14.19 billion, weighing in at above estimates of $13.93bn. 

This positive could form a strong platform for further interest-focused profits as higher-for-longer rates continue throughout the year and is certainly a bank that’s worth tracking as CPI continues to confound expectations.

On the date of publication, Dmytro Spilka did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.