Rate Hike To Propel Banks Higher: 5 Strong Choices
Zacks Investment Research | Dec 11, 2017 08:39PM ET
On Wednesday, Janet Yellen will hold her last press conference as Fed Chair after the two-day Federal Open Market Committee (FOMC) policy meeting draws to a close. Investors and market watchers are widely expecting the Fed to announce a quarter percentage point rate hike after this meeting.
Stocks should witness short-term gains post this announcement even though markets have mostly priced in the rate hike call. Financial stocks and banks in particular have been strong performers this year with the KBW Nasdaq Bank Index up 15.7% year to date. A near certain rate hike will only boost banks higher, which is why adding them to your portfolio looks like a smart option.
Rate Hike Nearly Certain
If the Fed does indeed decide to hike rates, it will be the third such increase for 2017. The CME Group’s FedWatch Tool puts the chances of a quarter point rate hike well above 90%, which makes an increase to 1.25% to 1.50% nearly certain. Of course, the Fed Chair has been hinting at a December rate hike for quite some time now, which is why analysts in general believe that such an occurrence has largely been priced in by equity markets.
And last week’s non-farm payrolls possibly removed any doubts over the likelihood of a rate hike completely. The data-dependent Fed’s spirits were significantly lifted after U.S. employers added 228,000 jobs in November, steering past expectations of 200,000. Also, the unemployment rate was unchanged at 4.1% in November and continues to remain at a 17-year low. (Read: Original post
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