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Special Report

Higher-for-Longer Rates Could Reward These 3 Overlooked Stocks

Authored by Chris Markoch. Date Posted: 1/8/2026. 

Quick Look

• Analysts now expect the Federal Reserve to make only one interest rate cut in 2026, signaling a higher-for-longer environment.
• Financial stocks outside traditional banking—such as market infrastructure and insurance firms—stand to benefit.
• These companies can convert elevated rates into earnings growth without depending on net interest margins.

The early days of 2026 feel a lot like 2025 when it comes to the debate over lower interest rates. While many remain bullish, as of Jan. 6 the CME FedWatch tool shows an 84% probability of a pause at the Fed’s January meeting. Many analysts now expect the Federal Reserve to make only one rate cut in 2026.

Investors haven’t fully priced “higher-for-longer” rates into their initial 2026 equity forecasts. If the Fed does pause in January, market participants will need to consider what that could mean for stocks in the first quarter — and possibly for the rest of the year.

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For many, higher rates point to fixed-income options such as money market funds or Treasury yields, which remain attractive for cautious income seekers. But elevated rates can also create opportunities in equities, particularly among finance stocks tied to market infrastructure and in insurers.

These companies provide the financial plumbing behind the scenes and can turn higher interest rates into earnings leverage. Here are three names to consider.

CME Group: Profiting From Cash and Volatility

First up is CME Group Inc. (NASDAQ: CME), operator of some of the world’s largest and most liquid derivatives exchanges, including the Chicago Mercantile Exchange (CME), the Chicago Board of Trade (CBOT), the New York Mercantile Exchange (NYMEX) and COMEX.

Most of CME Group’s revenue comes from trading volume, but the company also earns meaningful interest income on customer margin balances.

Traders post cash as margin to hold futures and options. When rates were near zero, those balances produced little income; as rates have normalized, that cash now generates material interest income that flows to the company’s bottom line with virtually no incremental cost.

Higher rates also tend to increase hedging activity and market volatility, boosting volumes in interest-rate futures, Treasury contracts and equity index derivatives.

CME stock carries a consensus Hold rating, reflecting a price-to-earnings (P/E) ratio around 26x — slightly above its historic average and the broader market. Still, analysts have been raising price targets as expectations for a Fed pause have risen.

Intercontinental Exchange: Exchanges Plus Rate-Sensitive Tech

Intercontinental Exchange Inc. (NYSE: ICE) is another global operator of exchanges, clearinghouses and data services. ICE benefits from interest earned on clearing collateral, which becomes more consequential when short-term yields remain elevated.

ICE’s business model is similar to CME’s but is more focused on international benchmarks and cross-border markets. The company also has growing exposure to mortgage technology and fixed-income data markets.

Higher rates have reshaped the housing and refinancing landscape, pushing lenders to rely more on analytics, automation and digital workflows to manage volume volatility and tighter margins. ICE’s Encompass platform and fixed-income data businesses monetize that shift.

ICE stock rose roughly 13% in 2025, leaving it a slight laggard. Analysts assign a consensus Buy rating with potential upside near 17%. Even with a P/E near 30x, the shares trade at a discount to the company’s historic average.

American International Group: Insurance Meets Higher Yields

American International Group Inc. (NYSE: AIG)offers a different way to capture the benefits of higher-for-longer rates. Insurers collect premiums up front and invest those funds—primarily in fixed-income securities—often for many years.

That structure was a headwind during the ultra-low-rate period from 2008 through 2021. Rising yields in recent years, however, have improved AIG’s reinvestment rates, boosting net investment income and giving the company greater underwriting flexibility.

Unlike banks, insurers don’t face deposit flight risk in a high-rate environment. Their liabilities tend to be longer dated, allowing them to lock in attractive yields for extended periods — creating a durable earnings tailwind if rates stay elevated through multiple reinvestment cycles.

AIG trades at roughly 15x earnings, and analysts forecast earnings growth exceeding 22% in 2026. That potential may not be fully reflected in the stock, which is approaching its 52-week (and all-time) high.

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