Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 70% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.

Banking stocks likely to benefit as Fed highlights hawkish rate stance

The Federal Open Market Committee (FOMC) has highlighted how rising inflation could soon impact rates, with banks looking appealing as a result.

Banks should benefit as Fed takes inflation more seriously

This week’s Federal Reserve (Fed) meeting provided a surprisingly hawkish take from Powell & Co, with the median dot plot mapping out a potential two rate hikes in 2023. With inflation on the rise of late, the key question had been over just how long Fed members would view it as transitory rather than persistent. The jump in projections for 2021 inflation highlights the fact that members are clearly becoming aware that this recent rise in prices may not be as fleeting as they had predicted. They also brought improved growth forecasts, which served to signal a potential sweet spot for the banking sector going forward. The procyclical nature of the financial sector does highlight how stocks within the sector are likely to outperform during times of worries around rising interest rates. Improved economic readings and monetary tightening do seem likely to persist as topics moving forward, while the prospect of increased government spending in the US coupled with the alleviation of Brexit fears call for optimism on either side of the Atlantic.

Bank of America

A major holding for Warren Buffet, Bank of America shares appeal to those looking for exposure to the US economy. The stock has dropped back below trendline support of late, with price falling into the prior high of $40.78. The respect of that level does highlight the potential to push higher from here, with a breakdown below that support level required to bring about expectations of a more protracted move lower. Should that occur, a break down towards the deep Fibonacci zone ($38.72-39.63) would be likely. Whether we see that near-term retracement or not, there is a good chance we will soon see the stock push higher once again.

Lloyds Banking Group

Lloyds has also been drifting lower of late, with the decline in yields denting sentiment for the sector. Nonetheless, this stock remains on an upward trend that is likely to persist as the economy picks up steam. With UK inflation above target after a reading of 2.1% on Wednesday, there is a good chance that the Bank of England (BoE) will also start to build towards a more hawkish tone like that seen in the US. With that in mind, Lloyds is expected to rise further as we go forward, with a bullish outlook in play unless price breaks below the 41p low.

Related articles

Live prices on most popular markets

  • Forex
  • Shares
  • Indices
liveprices.javascriptrequired
liveprices.javascriptrequired
liveprices.javascriptrequired

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

Plan your trading week

Get the week’s market-moving news sent directly to your inbox every Monday. The Week Ahead gives you a full calendar of upcoming economic events, as well as commentary from our expert analysts on the key markets to watch.


You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of spread betting and CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.


This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.