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2 Stocks That Make Great Investments During Times of High Inflation

Last month’s inflation is estimated to surpass record levels in May 2022, prompting the Fed to continue with its rate hikes. However, quality financial stocks Ally Financial (ALLY) and Bank of America (BAC) could be ideal investments to navigate such times of high inflation. Keep reading…

Inflation continues to wreak havoc across the economy despite the Fed’s tightening monetary policy. Economists expect the June consumer price index to be hotter than May’s 8.6% year-over-year pace. Consequently, the Fed’s hawkish stance remains unbattered despite the increasing odds of a recession.

Fed Governor Christopher Waller said, “I’m definitely in support of doing another 75 basis point hike in July, probably 50 in September, and then after that, we can debate whether to go back down to 25s.” Financial stocks tend to be significant beneficiaries of the rising rates. So, investing in quality financial stocks could help beat inflation.

Ally Financial Inc. (ALLY) and Bank of America Corporation (BAC) are well-positioned to capitalize on the rising interest rates. So, it could be wise to invest in these stocks now.

Ally Financial Inc. (ALLY)

ALLY, a digital financial-services company, provides various digital financial products and services to consumer, commercial, and corporate customers primarily in the United States and Canada. It has four segments: Automotive Finance Operations; Insurance Operations; Mortgage Finance Operations; and Corporate Finance Operations.

On May 18, 2022, Ally Invest, ALLY’s online brokerage and wealth management platform, launched Wealth Management advisory service. These expanding services should enhance customer experience.

ALLY’s net financing revenue came in at $1.70 billion for the 2022 first quarter, up 23.2% year-over-year. Its net income increased marginally on a sequential basis to $627 million. Also, its adjusted EPS increased 0.5% sequentially to $2.03.

Analysts expect ALLY’s revenue to increase 7.5% year-over-year to $8.82 billion in 2022. Its EPS is estimated to increase 38.2% per annum for the next five years. It surpassed the EPS estimates in three of the trailing four quarters.

Over the past month, the stock has lost 16.7% to close the last trading session at $34.74.

Bank of America Corporation (BAC)

BAC and its subsidiaries provide banking and financial products and services for individual consumers, small and middle-market businesses, institutional investors, large corporations, and governments worldwide. Its segments are Consumer Banking; Global Wealth & Investment Management; Global Banking; and Global Markets.

Last month, BAC announced that its market-leading Virtual Account Management (VAM) solution is coming to companies operating in the United States, reflecting its expansionary policies. It added the Netherlands to the existing UK and Ireland capabilities in 2021.

For the first quarter ended March 31, 2022, BAC’s net interest income increased 13.5% year-over-year to $11.57 billion. Its net income came in at $7.07 billion, up marginally on a sequential basis. Moreover, its total assets came in at $3.24 trillion, up 9% year-over-year.

BAC’s revenue is expected to come in at $101.54 billion in 2023, representing an 8.4% year-over-year rise. The company’s EPS is expected to increase 17% year-over-year to $3.85 in 2023. It surpassed EPS estimates in each of the four trailing quarters.

Over the past month, the stock has lost 11.4% to close the last trading session at $31.79.

ALLY shares were trading at $34.19 per share on Monday afternoon, down $0.55 (-1.58%). Year-to-date, ALLY has declined -27.20%, versus a -18.42% rise in the benchmark S&P 500 index during the same period.

About the Author: Riddhima Chakraborty

Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.


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