Daily Stock Pick: December 15th, 2021

Stocks were flat ahead of the highly anticipated Fed rate decision slated for 2:30 pm.  In an effort to quell sky-rocketing inflation, which is at its highest level in 39 years, economists expect the central bank to announce the speeding up of the emergency bond-buying program instituted in March of 2020.  A CNBC survey predicts the Fed will double the taper rate from $15 billion to $30 billion per month, which would end monthly bond purchases by April.  According to the survey, economists are predicting this will set the stage for the first interest rate hike in June of 2022.  

Today’s pick is a stock likely to do well as impending rate hikes draw nearer.  

Bank of America Corporation (BAC) provides banking and financial products and services for individual consumers, institutional investors, large corporations, and governments worldwide. It operates through the following segments: consumer banking; global wealth & investment management; global banking; and global market segments.

Thanks to its global investment banking and financial services portfolio, most are familiar with this financial titan.  In the U.S., BAC currently operates via 4,300 retail financial centers, 17,000 ATMs, and digitally serves 41 million active users. Furthermore, the company is also present in 34 other countries across the globe.

After more than doubling since its pandemic-era low, let’s take a look at the factors that could boost BAC going forward.  For one thing, the Fed has signaled two interest rate hikes, and they could both come next year, which should help BAC increase its interest income down the road.  According to Globe Newswire, zooming in a little closer, the global financial services market is expected to grow at a 9.9% CAGR to hit $22.5 trillion this year.    

Furthermore, BAC’s shift in focus towards the digital space seems to be benefiting the company.  Earlier this month, BAC reported that its Bank of America app facilitates 85% of deposit transactions on its network now.  This accounts for nearly 48 million checks that BAC customers deposited in the second quarter.

Jim Cramer recently cited Bank of America as one of the potential beneficiaries of rising rates.  He thinks that BAC will “make a killing if the Federal Reserve is forced to tighten.”

Consider BAC’s uninterrupted 21-year history of rewarding investors through dividends if you need another reason.  The company recently raised its quarterly dividend to $0.21 per share, up 16.7% from the previous quarter. 

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