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This Week's Exclusive News Will the Fed Cut or Pause? These Finance Stocks Can Win Either WayBy Chris Markoch. Article Published: 12/31/2025. 
What You Need to Know - Three financial stocks are positioned to benefit whether the Fed pauses or cuts interest rates in 2026.
- BAC, SCHW, and PRU offer different revenue drivers—from lending to fees to insurance—to navigate shifting monetary policy.
- These stocks show improving trends in earnings, price momentum, and income potential, making them attractive options for long-term investors.
Will they or won't they? Stocks have moved higher in the last quarter of 2025 as the Federal Reserve began cutting interest rates. Investors are now debating what comes next. There are persuasive arguments for further cuts and for a pause, and Fed officials themselves remain divided. Arguments for cutting are straightforward. Looser policy tends to be bullish for equities for several reasons, including lower borrowing costs for businesses, which can support hiring and reverse the current slowdown. Recently, President Trump decided to kill the coin, for good reason. It now costs 4 cents to make a single penny. Which means the government is losing 3 cents on every one it mints.
But the truth behind Trump's decision may be stranger than you think. What's really happening and what it could mean for your money Income-oriented investors also see attraction in dividend stocks, which may offer better returns than Treasuries or other fixed-income options as yields fall. There's also the matter of the national debt: the U.S. Treasury must refinance more than $10 trillion of debt over the next 12 months and would prefer to do so at lower rates. On the other hand, inflation still matters. Although the rate of price growth is slowing, it remains above the Fed's 2% target. So far, two rate cuts haven't sparked an inflation resurgence, but it's too early to declare victory — many stimulative provisions from recent fiscal legislation begin to take effect in 2026, and history shows that when consumers have more money to spend, spending tends to rise. Those questions will start to be addressed at the Fed's first meeting in January. Until then, it makes sense to consider stocks that look like solid buys whether the Fed cuts again or pauses. Finance stocks are one area to watch. Here are three candidates. Built to Monetize Either Side of the Rate Cycle Bank of America (NYSE: BAC) operates a scaled, diversified banking platform positioned to monetize both sides of the rate cycle. Management has shown it can control deposit costs without materially destabilizing the franchise — an important trait if policy rates decline more slowly than markets expect. The bank's technology and AI investments aim to expand operating leverage over time, so modest top‑line growth can still translate into attractive earnings and capital returns, bolstering a long‑term buy‑and‑hold case. BAC is up about 25% in 2025, and the chart shows a bullish pattern of higher highs and higher lows, with the stock finding support above its rising 100‑day simple moving average (SMA). Analysts' consensus price target implies roughly 8% upside, reflecting expectations for about 17% earnings growth over the next 12 months. 
A Fee-Driven Model Over Traditional Lending Charles Schwab Corp. (NYSE: SCHW) offers a different way to play strong U.S. households and markets. Unlike large banks, Schwab is less dependent on risky lending and generates most of its revenue from interest on client cash, trading activity, and paid advice. This asset‑light, fee-driven model is easier to scale across economic cycles. As interest-rate volatility subsides and customer behavior normalizes, Schwab's profits could become steadier — with more assets under management and recurring fee income making the firm appealing to investors who prefer fee-based financial businesses to heavy-lending models. SCHW is up about 35% in 2025, despite a steep pullback after its third-quarter results (which beat on both revenue and earnings). The stock recovered to an all-time high and has cooled off after getting overbought. Still, analysts remain bullish, forecasting roughly 23% earnings growth. 
Defensive Income With Long-Term Growth Tailwinds Prudential Financial Inc. (NYSE: PRU) provides exposure to insurance and retirement services — businesses that tend to benefit when long-term interest rates are higher, the population ages, and demand increases for products that guarantee future income. Prudential often sees demand rise during periods of market uncertainty as customers seek stability. It also holds a large investment portfolio that can earn higher yields today than in the 2010s, supporting steady income and long-term growth from retirement savings products. PRU is down about 3.9% year-to-date, but it finished the year on a stronger note — rising roughly 9.8% into mid‑December and forming a golden cross (the 50‑day SMA moving above the 200‑day SMA). Investors will be watching to see if the stock can hold above its 50‑day SMA. 
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