Best Stocks for Rising Interest Rates: 7 Companies to Watch

Higher interest rates usually create a difficult backdrop for equities. Borrowing becomes more expensive, economic activity may slow and higher discount rates can reduce company valuations. Yet some financial businesses can earn more when loan yields, client-cash returns or portfolio income increase. That benefit is never automatic: funding costs, balance-sheet duration and credit quality can matter as much as the central bank’s policy rate.

This guide compares the best stocks for rising interest rates, explains their business models and risks, and covers the main CFD trading considerations for traders.

Key Takeaways

• Banks, brokerages and insurers may benefit from rising rates, but the outcome depends on each company’s funding model and balance sheet.
• Bank earnings improve only when asset yields rise faster than deposit and wholesale funding costs.
• Brokerages may earn more on client cash, although customers can move money into higher-yielding alternatives.
• Insurers can reinvest premiums at better yields, but underwriting losses and asset-liability risks still matter.
• Strong rate-sensitive stocks combine potential earnings benefits with sound capital, diversified revenue and manageable credit risk.
• CFD trading introduces leverage, margin, financing and gap risk and does not provide ownership of the underlying shares.

What Rising Interest Rates Mean for Stocks

Rising rates change both the cost of capital and the way investors value future earnings. When a central bank increases its policy rate, short-term market rates usually move higher. Banks then adjust loan and deposit pricing, bond yields change, and companies refinancing debt may face larger interest bills.

Higher yields also increase the discount rate applied to future cash flows. This can pressure highly valued growth shares, although no sector is protected from a broad economic slowdown.

Financial companies are different because rates form part of their operating model. Banks earn interest on assets, brokers may earn returns on client cash, and insurers invest premiums. Higher rates can increase revenue only if liabilities and risks remain controlled.

Rising Rates, High Rates and a Steep Yield Curve Are Not the Same

Rising rates describe direction: policy rates and market yields are moving upwards. Higher-for-longer describes duration: rates remain elevated for an extended period. A steep yield curve means long-term yields are meaningfully above short-term yields.

These conditions do not have identical effects. Suppose a bank’s variable-rate loans reprice quickly while most deposits remain low-cost. Its net interest margin may widen. If customers demand much higher deposit rates, wholesale funding becomes expensive or the yield curve inverts, the same bank may see little benefit. Investors should therefore examine the whole rate structure, not only the latest central-bank decision.

Also read How to Trade the Fed Rate Decision

Which Sectors Can Benefit When Interest Rates Rise?

The clearest potential beneficiaries are financial businesses that can raise the yield on their assets faster than the cost of their liabilities. The main mechanism and risk differ by sector.

Banks

Banks earn net interest income from the difference between interest received on assets and interest paid on funding. Asset-sensitive banks can benefit when floating-rate loans and short-duration securities reprice upwards. A large base of stable, low-cost deposits can strengthen that advantage.

The important counterweight is deposit beta—the proportion of a market-rate increase passed to depositors. Fast deposit repricing can squeeze margins. Rising rates can also reduce the market value of fixed-rate securities, weaken loan demand and increase delinquencies or provisions if borrowers struggle.

Brokerages and Investment Platforms

Brokerages may invest unallocated client cash or place it with affiliated banks, earning a spread between the asset yield and the amount credited to clients. Securities-based lending can add another interest-sensitive revenue stream.

However, customers are more likely to move idle cash into money-market funds or other higher-yielding products when rates rise. This “cash sorting” can reduce low-cost balances and force a brokerage to use more expensive funding.

Insurers

Insurers collect premiums before many claims are paid and invest this pool of money. As bonds mature, new purchases at higher yields can lift portfolio income gradually. Life insurers may also benefit when higher yields improve spreads on long-duration products.

Claims inflation, catastrophes, weak underwriting, credit impairments or poor asset-liability matching can offset the rate benefit.

Exchange and Market-Infrastructure Companies

Rate uncertainty can increase demand for futures, options and other hedging instruments, supporting some exchange operators. Certain businesses may also earn interest on collateral. This is an indirect relationship: if volatility and trading activity fall, higher rates alone may not produce stronger earnings.

By contrast, highly leveraged companies, some real estate businesses, utilities and long-duration growth shares can face greater financing or valuation pressure. Individual fundamentals can still outweigh the sector pattern.

Best Stocks for Rising Interest Rates: 7 Companies to Watch

The following companies are research candidates rather than guaranteed winners. Each has an identifiable rate-sensitive revenue stream, but the strength of the thesis depends on funding, capital, credit quality, underwriting and valuation. Current filings and trading conditions should always be checked before making a decision.

JPMorgan Chase (JPM)

JPMorgan combines a broad deposit base with consumer, card, commercial and investment-banking operations. When loan and securities yields rise faster than deposit costs, that funding base can support net interest income. Diversified fee businesses may also reduce dependence on one rate outcome.

Scale does not remove risk. Compare management’s interest-income outlook with deposit costs, loan-loss provisions, capital ratios and rate assumptions. A weakening economy can raise credit costs even while asset yields remain high.

Bank of America (BAC)

Bank of America is commonly treated as an asset-sensitive bank because part of its balance sheet can reprice as market rates change. Floating-rate and shorter-duration assets may therefore generate more income during a rising-rate cycle.

Deposit beta, funding competition and securities duration determine how much of the benefit reaches earnings. Weak loan demand can limit growth, while unrealised losses may restrict flexibility if liquidity is needed.

Wells Fargo (WFC)

Wells Fargo’s consumer and commercial banking activities provide direct exposure to loan pricing and deposit funding. A favourable gap between asset yields and funding costs can support net interest margin.

Separate the rate thesis from company-specific execution and regulation. Useful indicators include deposits, loan growth, net interest margin, charge-offs, provisions and capital returns. Higher rates help less if funding costs or credit losses rise faster.

Charles Schwab (SCHW)

Charles Schwab combines brokerage services with banking operations. It can earn interest on client cash and other interest-earning assets, making net interest revenue an important part of the business model.

Rising rates can encourage clients to move idle balances into money-market funds, reducing low-cost cash and increasing funding pressure. Track net new assets, client cash, bank-deposit balances, funding costs and net interest revenue.

Morgan Stanley (MS)

Morgan Stanley offers a more diversified route through wealth management, institutional securities and investment management. Its wealth business includes client cash and lending, so rates can affect net interest income as well as customer behaviour.

It is not a pure rate play: trading, investment-banking pipelines, fee-based assets and market levels can be equally important. Monitor wealth-management interest income, client assets, funding costs and recurring revenue.

Allstate (ALL)

Allstate illustrates the property-and-casualty insurance mechanism. Premiums are invested until claims are paid, so maturing securities can be replaced with higher-yielding assets. Over time, that can lift net investment income.

Underwriting can dominate any one period. Review the combined ratio, claims severity, catastrophe losses and pricing alongside portfolio yield. Higher bond income offers limited protection if claims costs rise faster than premiums.

MetLife (MET)

MetLife provides life insurance, employee benefits and related financial products supported by a large investment portfolio. Higher reinvestment yields can improve investment income and product spreads gradually as existing assets mature.

Because insurance liabilities can extend for years, asset-liability matching is crucial. Credit quality, impairments, duration, capital and policyholder behaviour influence whether higher rates help. Sudden changes create different risks from a slow rise.

JPMorgan, Bank of America and Wells Fargo provide more direct bank-rate sensitivity. Schwab and Morgan Stanley combine rate exposure with client and market activity, while Allstate and MetLife offer an insurance mechanism whose benefit generally appears more gradually.

How to Evaluate Rate-Sensitive Stocks

A useful evaluation framework asks how quickly revenue can reprice, what the new income costs to fund, and whether the balance sheet can withstand stress. The same headline rate move can produce very different outcomes across two companies.

Revenue Sensitivity

Review management’s disclosed sensitivity to changes in market rates, while remembering that a parallel shift across the yield curve is only a model. Separate fixed-rate from floating-rate assets and note when loans, securities and liabilities reset. Fast asset repricing is helpful only if funding does not reprice faster.

Funding and Deposit Quality

For banks, compare non-interest-bearing deposits, deposit beta and wholesale borrowing. For brokerages, ask how easily clients can move cash into money-market products. Stable funding can be valuable, but customer behaviour often changes as the gap between deposit rates and market yields widens.

Balance-Sheet Strength

Examine capital, liquidity, securities duration, unrealised gains or losses and debt maturities. A mark-to-market loss matters if withdrawals or funding needs force a sale.

Credit and Underwriting Quality

For banks, follow delinquencies, charge-offs and provisions across consumer and commercial portfolios. For insurers, examine combined ratios, claims severity, catastrophe exposure and investment credit quality. Higher investment income cannot compensate indefinitely for weak lending or underwriting.

Valuation and Expectations

Price-to-earnings, price-to-book and return on equity should be used together and compared with the company’s own history and peers. If investors already expect a large rate benefit, even better earnings may not lift the share price. Valuation reflects expectations, not just current performance.

A practical five-question checklist is: How do assets reprice? How quickly do funding costs change? Is capital and liquidity sufficient? Are credit or underwriting trends stable? Is the expected benefit already reflected in the valuation?

Also read 6 Defensive Stocks to Buy or Watch in 2026

Four Rate Scenarios and What They Could Mean for the Watchlist

Scenario analysis is more useful than assuming every rate increase has the same effect. The speed of change, yield-curve shape and economic reason for the move all matter.

Gradual increases alongside steady activity can allow assets to reprice without an immediate surge in defaults. Sudden inflation-driven tightening is more disruptive: securities values may fall, customers may demand higher deposit rates and leveraged borrowers may struggle.

An extended plateau can support insurer reinvestment and companies with durable funding, but it also exposes weaker borrowers to refinancing pressure. Rate cuts may reduce bank margins, yet they can support bond values and borrowing demand. If cuts respond to recession, however, rising credit losses may outweigh cheaper funding. The reason for the policy change can be more important than its direction.

Also read How Do Interest Rates Affect Bonds?

Risks and Limitations of Rising-Rate Stock Strategies

A macroeconomic idea does not translate directly into a share-price result. Rates affect revenue, expenses, valuation and customer behaviour simultaneously and may change faster than a company can reposition.

Key risks include:

• Deposit costs rising faster than loan yields.
• An inverted yield curve reducing the reward for borrowing short and lending long.
• Unrealised losses building in fixed-rate bond portfolios.
• Higher borrowing costs weakening loan demand and increasing defaults.
• The expected rate benefit already being priced into the shares.
• Insurance claims and catastrophe losses outweighing investment income.
• Brokerage clients moving cash into higher-yielding alternatives.
• Inflation, employment or central-bank guidance reversing rate expectations.
• Regulation, litigation, capital requirements or execution overriding the macro thesis.

Diversifying across banks, brokerages and insurers reduces dependence on one earnings mechanism but does not remove financial-sector exposure. A downturn can weaken credit, market activity and asset values across all three groups.

How Traders Can Access Rate-Sensitive Stocks Through CFD Trading

A share CFD follows an underlying stock’s price without transferring ownership. Where available, a trader may go long or short. CFD holders generally lack voting rights, and cash adjustments may apply to corporate actions.

Long and Short Exposure

Suppose a trader expects a bank’s funding costs to remain contained after an earnings update. A long CFD position would gain if the quoted price rose and lose if it fell. A trader expecting deposit pressure to disappoint the market could take a short position, with the outcome reversed. Neither view is guaranteed, and losses can develop rapidly around announcements.

Also read Long vs Short Positions: Meaning, Differences and CFD Examples

Leverage, Margin and Overnight Financing

CFDs use margin, so you commit only part of the position’s full value. This magnifies both gains and losses. Adverse moves can trigger margin calls or automatic close-out rules, depending on the applicable account and jurisdiction. Positions kept open may incur overnight financing, which can make long holding periods costly. Traders should check the live instrument specification rather than assume a fixed leverage ratio or spread.

Event and Liquidity Risk

Central-bank decisions, inflation and employment reports, company earnings and regulatory news can cause abrupt repricing. Spreads may widen and slippage can occur when liquidity is limited. A stop-loss can help define intended risk, but a gap may cause execution at a different price. CFDs are complex, high-risk instruments and are not suitable for everyone.

How to Open a CFD Trading Account on Markets.com: A Step-by-Step Guide

Opening a CFD account on Markets.com takes just a few minutes, whether on the website or mobile app. Follow these five steps to go from sign-up to your first trade.

Step 1: Sign Up for an Account

Visit Markets.com or download the app, click "Create Account," and register with your email or a Google/Facebook/Apple account.

Step 2: Verify Your Identity (KYC)

Complete the KYC check by entering your personal details and uploading proof of identity and address.

Step 3: Fund Your Account

Deposit via card, bank transfer, e-wallet, Apple Pay, or Google Pay. The minimum deposit is $100.

Step 4: Choose a Market and Place Your Trade

Select an asset like gold, forex, or shares. Choose Buy if you expect the price to rise, Sell if you expect it to fall, and set a stop-loss and take-profit before confirming.

Step 5: Manage and Close Your Positions

Monitor open trades, adjust risk settings as needed, and close positions manually or automatically when targets are hit.

New to Markets.com? Claim a generous deposit bonus on your first trade. Hurry—this offer is only available for a limited time.

Conclusion

The best stocks for rising interest rates are generally companies that can convert higher yields into revenue without allowing funding, balance-sheet or credit risks to rise faster. Banks offer the most direct exposure, brokerages add sensitivity to client cash and market activity, and insurers may benefit gradually through portfolio reinvestment. The path and cause of rate changes matter as much as the headline level. A sound watchlist therefore requires current filings, risk indicators and valuation analysis. Markets.com can provide CFD price exposure where available, but leverage and financing costs require disciplined risk management.

FAQs

What stocks usually perform well when interest rates rise?

Banks with low-cost funding, brokerages that earn interest on client cash and insurers reinvesting at higher yields may benefit. Results also depend on the yield curve, deposit competition, credit conditions, valuation and economic growth, so sector membership alone is not enough.

Are bank stocks always good investments when interest rates rise?

No. Higher loan yields can be offset by deposit costs, weak loan demand, credit losses, securities write-downs or liquidity pressure. Net interest margin, deposit beta, capital and credit quality provide a better assessment than the policy rate alone.

Why can insurance stocks benefit from higher interest rates?

Insurers invest premiums before claims are paid. As existing bonds mature, reinvestment at higher yields can increase portfolio income. The improvement may be gradual, and claims inflation, catastrophes, underwriting losses or credit impairments can outweigh it.

What is the difference between rising rates and a steep yield curve?

Rising rates describe the direction of borrowing costs and yields. A steep yield curve means long-term yields are materially above short-term yields. Banks care about the spread between asset returns and funding costs, so rate increases alone do not determine profitability.

Can traders use CFDs for rising-interest-rate stocks?

Where available, CFD trading can provide long or short exposure to a stock’s price without ownership. Leverage, margin requirements, spreads, overnight financing and price gaps can magnify risk, especially around central-bank decisions and company earnings.

What metrics should investors watch in rate-sensitive stocks?

For banks, monitor net interest margin, deposit beta, capital and credit costs. For brokerages, track client cash and funding expenses. For insurers, review portfolio yield, asset-liability matching, investment credit quality and underwriting results. Valuation matters across every group.

Sources

Federal Reserve, Board Briefing on Impact of Rising Interest Rates and Supervisory Approach — https://www.federalreserve.gov/supervisionreg/files/board-briefing-on-impact-of-rising-interest-rates-and-supervisory-approach-20230214.pdf

FDIC, Quarterly Banking Profile Second Quarter 2026 — https://www.fdic.gov/quarterly-banking-profile/quarterly-banking-profile-second-quarter-2026.pdf

JPMorgan Chase, Annual Report and Proxy — https://www.jpmorganchase.com/ir/annual-report

Bank of America, 2025 Form 10-K — https://investor.bankofamerica.com/regulatory-and-other-filings/select-sec-filings/content/0000070858-26-000157/0000070858-26-000157.pdf

Wells Fargo, Annual Reports and Proxy Statements — https://www.wellsfargo.com/about/investor-relations/annual-reports/

Charles Schwab, 2025 Annual Report — https://content.schwab.com/web/retail/public/about-schwab/schwab_annual_report_2025.pdf

Morgan Stanley, Fourth Quarter 2025 Earnings Release — https://www.morganstanley.com/about-us-ir/shareholder/4q2025.pdf

The Allstate Corporation, 2025 Form 10-K — https://www.allstateinvestors.com/static-files/c3f6b5bb-d08d-4411-93c4-313e377942ca

MetLife, Full Year and Fourth Quarter 2025 Results — https://www.metlife.com/about-us/newsroom/2026/february/metlife-announces-full-year-and-4q-2025-results/