Strong inflationary trends typically mean the value of bonds and cash struggle to keep pace with the rising inflation. According to personal finance expert Suze Orman, “Only stocks have a track record of earning more than inflation.” Banks, especially, tend to benefit when the Fed tightens its monetary policy because of their asset-sensitive nature. When interest rates rise, bank assets like bonds and loans tend to climb higher than their liabilities, such as various deposits. And investors’ interest in the banking stocks is evident in the First Trust Nasdaq Bank ETF’s (FTXO) 3.2% gains over the past month.
So, to contribute to making one’s portfolio inflation-proof, we think it could be wise to scoop up quality banking stocks Wells Fargo & Company (WFC), U.S. Bancorp (USB), and KeyCorp (KEY). They are expected to gain significantly with the Fed tightening its monetary policy.