If the Fed Hikes Again, These 3 Financial Stocks Should Still Hold Up

High energy prices, driven by the geopolitical conflict in the Middle East, are impacting the global economy. While gas prices are a quick hit to consumers, the broader cost impact of rising energy costs takes a little time to work through the economy. The hit is starting to show through, as inflation has been on the rise. The Federal Reserve specifically highlighted inflation as a concern during its last meeting.

Financial companies are directly affected when the Federal Reserve raises rates, which it does to slow the economy. While some may see an adverse effect, these three should hold up fairly well: JPMorgan Chase (NYSE: JPM), American Express (NYSE: AXP), and Progressive (NYSE: PGR). Here's why.

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JPMorgan Chase controls what customers earn

JPMorgan Chase is a diversified banking giant. However, a key part of its business model is offering basic banking services, like checking accounts, deposit accounts, and certificates of deposit. The consumer and banking business alone holds nearly $1.1 trillion in deposits at the end of the first quarter of 2026.

This is interesting because the basic banking model is fairly simple. A bank like JPMorgan takes deposits and lends that money out. It pays depositors less than what it earns in interest on the loans it makes, with the difference representing profits for the bank. If the Federal Reserve increases interest rates, JPMorgan's ability to earn money on the loans it makes increases. But it doesn't have to increase the rate it pays depositors. Or, at the very least, it doesn't need to increase what it pays by as much as its income increases.

In other words, higher rates could be supportive of JPMorgan's business. But it isn't the only financial company that's positioned well for an increase in rates.

American Express has an attractive high-end model

American Express issues credit cards largely to higher-net-worth customers. Such customers tend to be more resilient to financial distress, allowing them to keep spending regardless of the economic environment. This is a double benefit because American Express also processes its customers' card transactions, generating fee income. If the Federal Reserve increases interest rates, it won't have much impact on the company's core business model.

However, rate increases are specifically meant to slow economic growth. If economic growth slows too much, it can lead to a recession. Generally speaking, that would be a bad outcome for consumer spending and could lead to slower transaction volume. But American Express' high-net-worth customers are likely to keep spending more than less wealthy consumers, who are being more directly impacted by the economic weakness. Even in the worst-case scenario, American Express should be a relatively strong performer.

Progressive gets the benefit of the float

Progressive is an insurance company. It collects premiums from customers up front and pays out under its policies when a claim is made. In the meantime, the company gets to hold onto the premiums and invest them. Progressive can't be too risky with its investments, as it will eventually need the cash to pay claims. Normally, a significant portion of this money, often called "the float," is held in short-term debt investments.

In the first quarter of 2026, Progressive generated just over $900 million in investment income. The float and the income it generates are an important part of the company's business model. If the Federal Reserve increases interest rates, Progressive can earn more interest on the float without taking on any additional investment risk. In other words, a rate hike is actually a big win for the insurer.

Rate hikes aren't all bad news

While the general perception is that Federal Reserve rate increases are bad for the finance industry, that isn't true across the board. Some companies, like JPMorgan and Progressive, may actually benefit. Others, like American Express, should see little impact. You don't have to fear a rate hike; just be prepared for one, which may include adding some of these resilient financial companies to your portfolio.

JPMorgan Chase is an advertising partner of Motley Fool Money. American Express is an advertising partner of Motley Fool Money. Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends American Express, JPMorgan Chase, and Progressive. The Motley Fool has a disclosure policy.