Financials

To tame spiking inflation, the Fed is tightening aggressively. Last month, it raised its benchmark interest rates by 75 basis points, marking the largest rate hike since 1994.

Many businesses fear rising interest rates. But for certain financials, like banks, higher rates are a good thing.

Banks lend money out at higher rates than they borrow at, pocketing the difference. As interest rates increase, this earnings spread widens.

Banking giants are also well-capitalized right now and have been busy returning money to shareholders.

Last year, Bank of America boosted its quarterly payout by 17% to 21 cents per share. Morgan Stanley doubled its quarterly dividend to $0.70 per share – which was followed by another increase recently to $0.775 per share. And JPMorgan increased its quarterly rate by 11% to $1 per share.

Investors can also get exposure to financial stocks through ETFs like the Financial Select Sector SPDR Fund ( $Financial Select Sector SPDR Fund (XLF.US)$ ) and the Vanguard Financials ETF ( $Vanguard Financials ETF (VFH.US)$ ). $JPMorgan (JPM.US)$ $Bank of America (BAC.US)$ $Citigroup (C.US)$ $Morgan Stanley (MS.US)$ $Wells Fargo & Co (WFC.US)$ $Goldman Sachs (GS.US)$