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As Fed Hikes, Only Pockets of Value in Banks

The banks set to benefit the most from higher rates are quite pricey today, but we do see credit card issuers Capital One and American Express as undervalued.

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Jim Sinegal: The Federal Reserve announced that it will be continuing along the path to slow interest rate normalization today. The Federal Reserve Open Market Committee decided to raise the target federal funds rate by 25 basis points. That's not surprising, given the economic progress that's occurred over the last year. We've had significant job gains, the unemployment rate is low, consumer spending is up, as is business investment.

The one sticking point is still inflation, which remains below the Federal Reserve's 2% target. The Fed believes that this momentum in the economy will eventually raise inflation up over 2%. We've seen some small hints in the data, nothing yet to be concerned about, but the Fed is trying to get ahead of the puck here, so to speak.

Jim Sinegal does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.