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‘Exploring for critical elements and precious metals in New Brunswick, Canada.’
As geopolitical conflicts in the Middle East continue to push up energy prices, inflationary pressures in the US are heating up once again. The Federal Reserve has explicitly highlighted inflation as a key concern during its latest meeting, and market expectations for another rate hike within the year are rising. For the financial sector, a rate hike is often seen as a negative, as higher interest rates dampen economic activity and increase credit risk.
However, not all financial companies will suffer in a rate-hike cycle. Three stocks – JPMorgan Chase (JPM), American Express (AXP), and Progressive (PGR) – each with unique business models, are poised to remain resilient as the Fed tightens monetary policy further.
JPMorgan Chase: Controlling deposit costs, benefiting from wider net interest margins
As the largest universal bank in the US, one of JPMorgan Chase’s core businesses is providing basic banking services to individuals and businesses. As of the first quarter of 2026, its Consumer & Community Banking division held nearly $1.1 trillion in deposits. The bank’s profit model is straightforward: take deposits, make loans, and earn the spread. When the Fed raises rates, the income from loans rises quickly, but deposit rates do not need to increase by the same amount – banks have significant control over the interest they pay on deposits. This means a rate hike could actually widen JPMorgan’s net interest margin, directly boosting profits. This asymmetric pricing power gives it a natural advantage in a rising-rate environment.
American Express: High-net-worth clientele provides cushion, transaction volumes relatively resilient
American Express primarily serves high-net-worth credit card customers. Such clients tend to be more resilient during economic downturns, with their spending appetite and ability to pay far less impacted than the mass market. More importantly, AmEx plays a dual role as both issuer and payment network, generating fee income from every transaction. While the purpose of a rate hike is to cool the economy, if the slowdown becomes excessive or tips into recession, total consumption will inevitably come under pressure. However, AmEx’s affluent customers have relatively stable spending habits, so even in a recessionary scenario, its performance should outperform financial companies that rely on mass-market consumption. This gives it strong defensive attributes in a rate-hike cycle.
Progressive: Investing the float, rate hikes directly boost investment income
Progressive is a property and casualty insurance company. Its business model involves collecting premiums upfront and paying out claims when they occur. During the time lag between premium income and claim payouts, the company holds a large amount of cash – known in the industry as “the float.” These funds must be invested conservatively, typically in short-term fixed-income assets. In the first quarter of 2026, the company generated over $900 million in investment income. If the Fed raises rates, short-term bond yields rise accordingly, allowing Progressive to earn higher interest on its float without taking on any additional credit risk. Thus, a rate hike is not a negative for the insurer but a direct positive.
Summary
A rate hike is not uniformly negative for the financial industry. JPMorgan Chase benefits from wider net interest margins thanks to its deposit pricing power; American Express maintains transaction resilience backed by its high-net-worth client base; and Progressive captures excess returns from investing its float. For investors, rather than fearing a rate hike, it makes sense to position in advance in companies that can operate steadily in a rising-rate environment. These three stocks deserve a place on a defensive watchlist.
