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Why These Banking Stocks Could Soar on Rate Cuts

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Key Points

  • As markets prepare for the Fed to cut interest rates in the United States, savvy investors will position their portfolios in these banking stocks.
  • Exposed to both the business and consumer side of the market, these names are set to go on ESP expansions.
  • One is the higher-risk/higher-reward name of the list, for those looking for a more exciting ride.
  • Interested in The Goldman Sachs Group? Here are five stocks we like better.

One of the main drivers of the business cycle (and therefore some stocks) is the direction of credit and liquidity. In this sense, these two areas of the United States economy are driven mainly by where interest rates are. They are set to go next, so today’s setup for the Federal Reserve is one of the most important in this current cycle, as it is already creating very high expectations among investors.

With this in mind, investors can start examining the first areas of any economy that benefit from lower interest rates before most others, and that is the financial sector. Banking stocks, from the regional smaller ones up to the big investment banks, could see a decent earnings per share (EPS) expansion in the coming months and quarters, driven by this potential lower interest rate environment.

That is why creating a watchlist of the best names to soar in this current setup is crucial for investors and their portfolios. Incorporating names like J.P. Morgan Chase & Co. NYSE: JPM, Citigroup Inc. NYSE: C, and The Goldman Sachs Group Inc. NYSE: GS into this watchlist can be a lucrative endeavor in the near future for those savvy enough to position themselves ahead of the next wave.

J.P. Morgan Chase: The Safer Way to Play This Chapter

JPMorgan Chase & Co. Today

JPMorgan Chase & Co. stock logo
JPMJPM 90-day performance
JPMorgan Chase & Co.
$297.45 +4.54 (+1.55%)
As of 12:37 PM Eastern
This is a fair market value price provided by Polygon.io. Learn more.
52-Week Range
$200.61
$305.15
Dividend Yield
1.88%
P/E Ratio
15.26
Price Target
$291.67

There are two types of banks: commercial banks and investment banks. Both are exposed to the underlying interest rate cycle, albeit in different ways. Commercial banks are now poised to profit from the surge in demand for credit lines and other lending products from American consumers, reflecting their commercial nature.

The other side, the investment banking side, benefits from the underlying business activity that is accommodated by lower lending costs, such as mergers and acquisitions (M&A) and events like initial public offerings (IPOs). When it comes to J.P. Morgan Chase, investors can expose their capital to both of these areas.

This current expectation could explain why the stock has delivered a 23% run on a year-to-date basis, and is now trading at 96% of its 52-week high, commanding even more upside as institutional players like Corient Private Wealth boosted their holdings by 1.2% as of August 2025, bringing their net position to a high of $983.5 million today.

Citigroup’s Footprint Creates a Great Hedge

Citigroup Today

Citigroup Inc. stock logo
CC 90-day performance
Citigroup
$97.85 +1.98 (+2.06%)
As of 12:37 PM Eastern
This is a fair market value price provided by Polygon.io. Learn more.
52-Week Range
$55.51
$98.14
Dividend Yield
2.45%
P/E Ratio
14.46
Price Target
$96.96

Since Citigroup falls into the same category as J.P. Morgan Chase, which operates in both the commercial and investment banking sectors, investors need to focus on one of the unique setups found in Citigroup. That unique standpoint comes from the bank’s footprint outside the United States.

The implications for currency markets in this rate cut scenario are that the dollar may weaken further, creating a tailwind in overseas economies. This could lead to a new growth trajectory for Citigroup, as it can begin to roll out more products in response to the new economic activity.

Therefore, if this economic activity takes a bit longer to be realized in the United States, investors can hedge their exposure by also investing in Citigroup’s exposure to other markets.

This favorable setup may explain why some Wall Street analysts recently decided to boost their ratings for Citigroup, surpassing the Moderate Buy consensus and $96.9 target.

One of these analysts was Chris Kotowski from Oppenheimer, who now rates Citigroup as an Outperform, accompanied by a $124 per share valuation. This implies a new 52-week high and 30% additional upside potential for investors to enjoy in the coming months.

For Risk Takers: Goldman Sachs Takes the Lead

The Goldman Sachs Group Today

The Goldman Sachs Group, Inc. stock logo
GSGS 90-day performance
The Goldman Sachs Group
$757.62 +15.77 (+2.13%)
As of 12:37 PM Eastern
This is a fair market value price provided by Polygon.io. Learn more.
52-Week Range
$439.38
$763.47
Dividend Yield
2.11%
P/E Ratio
16.69
Price Target
$660.00

Goldman Sachs differs from the other names in this list due to its heavy exposure to the investment banking business, which can be more cyclical and uncertain, despite the prospect of a lower interest rate environment. However, there are some reasons this name could keep outperforming in the future.

One reason is that this rate cut could increase market volatility, creating a potential windfall for the bank’s trading department. The other is that lower interest rates make it easier for M&A activity to take place, and considering that most of the S&P 500 is trading significantly below 52-week highs, chances are these deals will be taken advantage of.

Over the past month, some bearish traders have woken up to this fact in Goldman Sachs stock, as 4% of the bank’s short interest has declined, signaling an initial sign of bearish capitulation to investors. Historically, everyone knows that investment banks like Goldman tend to outperform significantly; hence, there is no reason to remain short.

Should You Invest $1,000 in The Goldman Sachs Group Right Now?

Before you consider The Goldman Sachs Group, you'll want to hear this.

MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and The Goldman Sachs Group wasn't on the list.

While The Goldman Sachs Group currently has a Hold rating among analysts, top-rated analysts believe these five stocks are better buys.

View The Five Stocks Here

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Gabriel Osorio-Mazilli
About The Author

Gabriel Osorio-Mazilli

Contributing Author

Equity Research, Dividend Investing, ETFs, Global Markets

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Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
JPMorgan Chase & Co. (JPM)
4.5617 of 5 stars
$296.441.2%1.89%15.24Moderate Buy$291.67
Citigroup (C)
4.8984 of 5 stars
$97.441.6%2.46%14.42Moderate Buy$96.96
The Goldman Sachs Group (GS)
4.6024 of 5 stars
$755.051.8%2.12%16.66Hold$660.00
Compare These Stocks  Add These Stocks to My Watchlist 

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