Stocks ticked slightly lower in early trading after 3 straight days of gains for the major indices. Travel and other reopening stocks that led the market higher in recent days were on the decline this morning. The moves come ahead of tomorrow’s release of the consumer price index for November. Economists expect the year-over-year growth rate to be 6.7%, representing the biggest increase since June 1982.
According to Ed Moya, senior market analyst with Onada, the market is in a wait-and-see mode ahead of the important inflation data, which could “fuel further Fed rate hike bets.”
In today’s stock pick, we’ll discuss 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.”
If you need another reason, consider BAC’s uninterrupted 21-year history of rewarding investors through dividends. The company recently raised its quarterly dividend to $0.21 per share, up 16.7% from the previous quarter.
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