3 Financial Stocks That Could Soar After the Fed's Interest Rate Cut

Key Points

• Upstart’s lending activity will accelerate.

• Robinhood’s customers will trade more stocks, options, and cryptocurrencies.

• S&P Global’s credit rating business will grow as companies issue more debt again.

• 10 stocks we like better than Upstart ›

The Federal Reserve finally cut its benchmark rate by 25 basis points on Sept. 17. That marked its first rate cut of 2025, and the Fed penciled in another two rate cuts by the end of the year. That would match its three rate cuts in 2024. Declining interest rates often drive investors back toward higher-risk growth stocks or higher-yielding dividend stocks.

However, lower rates are generally a mixed bag for many financial stocks. For traditional banks, lower rates can spur more lending activity, but they'll reduce the net interest income banks generate from those loans. Lower rates can also make savings accounts and CDs less appealing.

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But looking beyond traditional banks, there are still plenty of financial stocks that could thrive as interest rates decline. Let's take a closer look at three of those promising plays: Upstart (NASDAQ: UPST), Robinhood (NASDAQ: HOOD), and S&P Global (NYSE: SPGI).

Upstart

Upstart is a lending marketplace that approves loans for banks, credit unions, and auto dealerships. Instead of using traditional data like an applicant's credit score or annual income, its AI-powered platform reviews non-traditional data points like standardized test scores, GPAs, and previous jobs to approve a wider range of loans.

Upstart is just an intermediary that doesn't shoulder those loans, so it doesn't need high interest rates to grow its profits. Instead, most of its revenue comes from the referral fees it charges its lending partners. Lower interest rates should drive more loan applications and boost its fee-based revenues without squeezing its margins.

Upstart struggled in 2022 and 2023 as rising interest rates throttled the market's demand for new loans, but its growth accelerated again in 2024 as interest rates declined. Therefore, the Fed's rate cuts should generate even stronger tailwinds for its business.

From 2024 to 2027, analysts expect Upstart's revenue and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) to increase at compound annual growth rates (CAGRs) of 36% and 245% as interest rates decline, it automates more loans, and it gains more "super prime" borrowers. Those are incredible growth rates for a stock that trades at 22 times next year's adjusted EBITDA -- and it could soar even higher as the macro environment improves.

Robinhood

Robinhood, the online brokerage that popularized commission-free trades, generates most of its revenue from two main sources: Its payment for order flow (PFOF) model of selling its trades to high-frequency trading (HFT) firms, and its net interest income from its margin loans and sweep accounts.

The Fed's rate cuts should reduce its net interest income, but they'll also boost its trading volumes as more investors pivot toward riskier stocks and cryptocurrencies again. More of its customers should also sign up for its subscription-based Gold tier. This tier provides $1,000 of interest-free margin, reduced margin rates, higher interest rates on idle cash, bonuses on taxable deposits and IRA contributions, higher limits on instant deposits, access to Level II trading data, and other perks. It served 3.5 million Gold subscribers in its latest quarter. That's up from just 2.6 million subscribers at the end of 2024.

From 2024 to 2027, analysts expect its revenue and adjusted EBITDA to grow at CAGRs of 22% and 30%, respectively. It might not seem like a bargain at 38 times next year's adjusted EBITDA, but it should keep growing as lower rates draw more investors back to the market.

S&P Global

S&P Global provides financial data, credit rating, and analytics services for all the Fortune 100 companies and most of the Fortune 500 companies. Its top customers are big banks, insurance companies, corporations, universities, and institutional investors that use its tools to make their financial decisions. It's been rolling out new AI features -- including its Spark Assist generative AI co-pilot -- to optimize, accelerate, and automate many of those tasks.

S&P Global and its smaller competitor Moody's hold a near-duopoly in this lucrative market. Its customers use its services through both bull and bear markets, so it's often considered an evergreen stock. However, higher interest rates temporarily curbed the growth of its credit rating business in 2023 as companies issued less debt.

In 2024, its growth accelerated again as interest rates declined. From 2024 to 2027, analysts expect its revenue and adjusted EBITDA to grow at CAGRs of 7% and 8%, respectively. It still looks reasonably valued at 21 times next year's adjusted EBITDA, and it's one of the easiest ways to profit from the upcoming interest rate cuts.

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Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Moody's, S&P Global, and Upstart. The Motley Fool has a disclosure policy.