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3 Bank Stocks to Buy if You’re Worried About Inflation

Stock MarketsNov 15, 2021 10:31AM ET
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© Reuters. 3 Bank Stocks to Buy if You’re Worried About Inflation

With inflation heading northwards, investors are seeking opportunities in sectors that can help them navigate the difficult economic waters. And because banks typically fare well in inflationary conditions, we think it could be wise now to add quality banking stocks Wells Fargo (NYSE:WFC), U.S. Bancorp (USB), and KeyCorp (NYSE:KEY) to one’s portfolio. Read on.The major stock market indices retreated last week as consumer price data showed higher-than-expected inflation. The Consumer Price Index rose 6.2% in October from a year earlier, its biggest jump in more than 30 years. Inflation has been climbing due to rising demand fueled by liquidity, an economic recovery-induced buying spree, and supply-side constraints.

Strong inflationary trends typically mean the value of bonds and cash struggle to keep pace with the rising inflation. According to personal finance expert Suze Orman, “Only stocks have a track record of earning more than inflation.” Banks, especially, tend to benefit when the Fed tightens its monetary policy because of their asset-sensitive nature. When interest rates rise, bank assets like bonds and loans tend to climb higher than their liabilities, such as various deposits. And investors’ interest in the banking stocks is evident in the First Trust Nasdaq Bank ETF’s (FTXO) 3.2% gains over the past month.

So, to contribute to making one’s portfolio inflation-proof, we think it could be wise to scoop up quality banking stocks Wells Fargo & Company (WFC), U.S. Bancorp (USB), and KeyCorp (KEY). They are expected to gain significantly with the Fed tightening its monetary policy.

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3 Bank Stocks to Buy if You’re Worried About Inflation
 

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