2 stocks that make great investments in times of high inflation


Inflation continues to wreak havoc across the economy despite the Fed’s tightening of monetary policy. Economists expect June’s consumer price index to be warmer than May pace of 8.6% year-over-year. Consequently, the Fed’s hawkish stance remains unchanged despite the growing odds of a recession.

Fed Governor Christopher Waller said, “I’m definitely in support of making another 75 base points up in July, probably 50s in September, then after that we can debate whether to go back down to 25s. Financial stocks tend to be big beneficiaries of rising rates. Thus, investing in quality financial stocks could help fight inflation.

Ally Financial Inc. (ALLY) and Bank of America Corporation (BAC) are well positioned to take advantage of rising interest rates. So it might be a good idea to invest in these stocks now.

Ally Financial Inc. (ALLY)

ALLY, a digital financial services company, provides various digital financial products and services to consumers, businesses and enterprises primarily in the United States and Canada. It comprises four segments: Auto Finance Operations; insurance operations; mortgage financing transactions; and the company’s financial operations.

On May 18, 2022, Ally Invest, ALLY’s online brokerage and wealth management platform, launched the Wealth Management Advisory service. These expanding services should improve the customer experience.

ALLY’s net financing income was $1.70 billion for the first quarter of 2022, up 23.2% year-over-year. Its net income increased slightly on a sequential basis to $627 million. Also, its adjusted PES rose 0.5% sequentially to $2.03.

Analysts expect ALLY’s revenue to grow 7.5% year-over-year to $8.82 billion in 2022. Its EPS is expected to grow 38.2% annually in over the next five years. It has exceeded EPS estimates in three of the past four quarters.

Over the past month, the stock has lost 16.7% to close the last trading session at $34.74.

Bank of America Corporation (BAC)

BAC and its subsidiaries provide banking and financial products and services to individuals, small and medium-sized businesses, institutional investors, large corporations and governments around the world. Its segments are Consumer Banking; Global Wealth and Investment Management; Global banking services; and global markets.

Last month, BAC announced that its market-leading Virtual Account Management (VAM) solution would be offered to companies operating in the United States, reflecting its expansionist policies. It added the Netherlands to the existing capacities of the UK and Ireland in 2021.

For the first quarter ended March 31, 2022, BAC’s net interest income increased 13.5% year-over-year to $11.57 billion. Its net income was $7.07 billion, up slightly on a sequential basis. Additionally, its total assets stood at $3.24 trillion, up 9% year-over-year.

BAC’s revenue is expected to reach $101.54 billion in 2023, representing an 8.4% year-over-year increase. The company’s EPS is expected to grow 17% year-over-year to $3.85 in 2023. It has exceeded EPS estimates in each of the past four quarters.

Over the past month, the stock has lost 11.4% to close the last trading session at $31.79.

ALLY shares were trading at $34.19 per share on Monday afternoon, down $0.55 (-1.58%). Year-to-date, ALLY is down -27.20%, compared to a -18.42% rise in the benchmark S&P 500 over the same period.

About the Author: Riddhima Chakraborty

Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master’s degree in economics, she helps investors make informed investment decisions with her insightful commentary. After…

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