Rate Hikes Could Be Coming: History Likes These 4 Bank Stocks
The Federal Reserve is gearing up to raise rates again, and Wall Street's four biggest banks are not equally positioned to benefit. History shows at least one of them actually loses ground when tightening cycles hit.
Although rate hikes disappeared from the Federal Reserve’s playbook for 3 years, Wall Street is preparing for another tightening cycle. The Fed raised rates in September for the first time in 3 years, leaving the upper bound of the federal funds target range at 4.00%. Traders on Kalshi put a 72% market-implied probability on another 25-basis-point hike at the December 9 meeting. But history has treated big banks unevenly when rates climb, and the four money-center giants in the benchmark S&P 500 most tied to this trade each came out of past cycles with different wounds.
Inflation is the reason the hikes are back. The core PCE price index, the Fed’s preferred gauge, rose to 130.90 in its latest reading, the highest in a series that has climbed every month since November 2025. BofA Global Research projects CPI inflation of 3.3% in 2026 and 3.4% in 2027, and JPMorgan Chase (NYSE:JPM | JPM Price Prediction) CEO Jamie Dimon has listed "sticky inflation" among the economy’s biggest risks.
Why Rising Rates Fatten Bank Margins
For JPMorgan, Bank of America (NYSE:BAC), Goldman Sachs (NYSE:GS) and Citigroup (NYSE:C), the key mechanism is net interest margin: the gap between what a bank earns on loans and securities and what it pays depositors. When the Fed hikes, floating-rate loans reprice higher quickly while many deposit rates lag behind, so the spread widens. That buffer shrinks when savers move cash into higher-paying CDs, when borrowers default, or when bonds bought at lower yields lose value. The pressure ran the other way in the zero-rate era, when 24/7 Wall St. reported that low rates forced banks to re-examine their strategies.
Three Hiking Cycles, One Uneven Scorecard
Dividend-adjusted share price returns are tracked from the month-end before each cycle’s first hike to the month-end of its final hike.
| Bank | 2004 to 2006 | 2015 to 2018 | 2022 to 2023 |
|---|---|---|---|
| JPMorgan Chase | 22.6% | 57.7% | 16.8% |
| Bank of America | 26.9% | 48.9% | -24.8% |
| Goldman Sachs | 63.2% | -8.4% | 8.6% |
| Citigroup | 12.2% | 0.7% | -15.2% |
JPMorgan is the only one of the four that rose in all three cycles. The other three each posted at least one losing cycle, so rate hikes have acted as a selective tailwind for the group.
JPMorgan Chase Went Three for Three
CFO Jeremy Barnum said the bank remains "asset-sensitive and probably a little bit more asset-sensitive than the EAR shows" because deposit costs have risen more slowly than modeled. Third-quarter EPS came in at $5.57 on revenue of $50.9 billion, up 8%, and management’s central case calls for 2027 NII ex-Markets of approximately $107 billion, with about a quarter of the expected increase tied to hikes in the forward curve. At 13x forward earnings, it carries the highest multiple of the group. Its main risk is loan losses: Barnum warned that an aggressive, extended cycle "is going to involve higher unemployment, which will produce weaker consumer credit results."
Bank of America Has the Biggest Rate Lever and a Bond Scar
Bank of America says that a 100-basis-point rise in rates would add approximately $1.40 billion to net interest income over 12 months. NII rose 8% to $16.45 billion in the third quarter, and management expects 2027 growth of 8% or more, assuming hikes in December, March and June. The stock has slipped 8.96% year to date and trades at 10x forward earnings. Its main risk is unrealized bond losses: higher rates caused a $1.8 billion AOCI hit that helped pull CET1 down to 10.9%. Investors should weigh that against the stock’s 24.8% slide in the last cycle.
Goldman Sachs Sells Volatility
Goldman makes more from trading and financing than from loan spreads, and rate changes stir up both. Third-quarter equities financing revenue jumped 96% to $3.37 billion, and EPS of $17.01 beat the $13.65 consensus. CEO David Solomon said "a 5% 10-year Treasury doesn’t scare me" as an operating environment. The shares trade at 12x forward earnings. Its main risk is market volatility. Solomon acknowledged that "what creates headwinds for markets is when you have very, very abrupt moves," and the stock lost 8.4% across the 2015 to 2018 cycle.
Citigroup Offers the Cheapest Multiple and the Thinnest Record
CFO Gonzalo Luchetti said a higher-for-longer environment "should be net positive for us," with most of the bank’s rate sensitivity sitting outside the U.S. in its services franchise. Services NII rose 17%, and Citi raised its 2026 NII ex-markets outlook to the mid-to-high 6% range. At 9x forward earnings, it is the cheapest of the four, but its track record is also the weakest. Its main risk is deposit flight. Luchetti acknowledged that "there will be competition for deposits; money supply may tighten."
What to Watch Before the December Decision
The December 9 meeting will test the 72% hike odds. After that, I’m watching three signals: whether customers move more money into CDs, whether card charge-offs climb past JPMorgan’s roughly 3.2% guide, and how much AOCI pressure cuts into capital ratios. Over the long run, Wall Street’s biggest banks have gained: over ten years, JPMorgan shares rose 550.41%, Goldman Sachs 521.78% and Bank of America 272.16%. History has treated these lenders unevenly when rates rise, and JPMorgan is the only one of the four that rose in all three cycles.
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Lee Jackson has covered Wall Street analysts' equity and debt research and equity strategy daily for 24/7 Wall St. since 2012. His broad, diverse career, including a stint as creative services director at an NBC affiliate in Austin, Texas, gives him unique insight into the financial industry.
Lee Jackson's journey in the financial industry spans more than 30 years, including nearly two decades as an institutional equity salesperson at Bear Stearns, Lehman Brothers, and Morgan Stanley. His career spanned pivotal sell-side Wall Street events, from the dot-com rise and bubble to the Long-Term Capital Management debacle, 9/11, and the Great Recession of 2008. This reflects his resilience and adaptability amid market volatility.
Lee Jackson’s practical financial industry experience, gained through a career at some of the biggest banks and brokerage firms, is complemented by a lifetime of writing across various platforms. This unique combination allows him to shed light on the intricacies of Wall Street in a way only someone with deep insider experience and knowledge can. Moreover, his extensive network across Wall Street continues to provide direct access for him and 24/7 Wall St., a privilege few firms enjoy.
Since 2012, Jackson’s work for 24/7 Wall St. has been featured in Barron’s, Yahoo Finance, MarketWatch, Business Insider, TradingView, Real Money, The Street, Seeking Alpha, Benzinga, and other media outlets. He attended the prestigious Cranbrook Schools in Bloomfield Hills, Michigan, and has a degree in broadcasting from the Specs Howard School of Media Arts.
