An increase in the federal funds rate is often considered something that would be bearish for stocks — and indeed, the market's sharp drop on Friday was apparently due to rising expectations that the Fed could hike at its September meeting. But as Goldman's options research team points out, "A rise in rates is not a negative for all equities."
Financial stocks are particularly set to be helped by an increase in short-term rates, given that many companies in the sector invest in liquid low-risk investments; as short-term rates rise, the cash on banks' balance sheets yields more. Particular names that would be aided include Bank of America, Regions Financial and Zions Bankcorp, according to Goldman.
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