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The recent July inflation report came in a bit cooler than expected, providing further evidence that the Federal Reserve will soon start to cut interest rates. As the likelihood of a rate cut increases, investors should consider stocks in sectors that historically benefit from a lower rate environment. JPMorgan Chase & Co. (JPM) and Bank of America Corp. (BAC) are two potential winners, writes Jesse Cohen, senior financial analyst at Investing.com.

The July CPI report indicated that inflation rose by 0.2% for the month, compared to expectations for a gain of 0.2%. On an annual basis, the headline CPI increased by 2.9%, down from the 3% rise seen in June.

This marked the smallest year-over-year increase since March 2021, signaling that the aggressive interest rate hikes by the Fed are finally having their intended effect on inflation.

Using the InvestingPro screener, I managed to easily identify several stocks with strong upside ahead worth considering amid the current market backdrop.

Source: InvestingPro

While financial stocks typically face headwinds from lower interest rates, large banks like JPMorgan and Bank of America could still thrive in this environment. These banks have diverse revenue streams, including wealth management, trading, and investment banking, which can offset the impact of lower net interest margins.

Moreover, lower interest rates could lead to an increase in loan demand, boosting these banks' lending businesses. Additionally, with strong capital positions and robust dividend yields, JPMorgan Chase and Bank of America offer both growth and income potential for investors.

My recommended action would be to consider buying shares of JPMorgan and Bank of America.

About the Author

Jesse Cohen is a senior financial analyst at Investing.com, where he provides in-depth analysis and insights on the U.S. stock market, with a focus on high-growth technology stocks. Mr. Cohen grew up in Fair Lawn, NJ as the oldest of three siblings. He has a BA in finance from Temple University.Currently a resident of Tel Aviv, Israel, Mr. Cohen joined Investing.com in August 2010, and has since published hundreds of analysis articles in which he provides timely stock picks on a consistent basis.

He has also been quoted and featured in well-known financial media outlets, such as Reuters, the Wall Street Journal, Business Insider, and Newsweek. Other publications that have quoted him include: the New York Times, USA Today, the Guardian, Forbes, the San Jose Mercury News, and many more.

When not covering the markets and watching charts, Mr. Cohen enjoys spending time with his three children. He also has two dogs, which at times keep him even busier than the kids!

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