Fed Rate Hike Bolsters Visa and Wells Fargo Amid Rising Interest

The Federal Reserve raised interest rates for the first time in three years to a target range of 3.75% to 4%. The vote was unanimous, and Fed Chairman Kevin Warsh led the committee in this decision.

While the future is uncertain, market expectations suggest at least one more rate hike this year and potentially two, according to CME Group's FedWatch tool. Additionally, the FOMC's dot plot from its September meeting indicates that most members of the committee don't expect rate cuts until at least 2028.

Visa (V) is a stock built to handle an elevated-rate environment. As the largest payments network in the world, it helps route transactions between various parties and takes a small fee as a percentage of each transaction. With robust economic activity and rising inflation, Visa's fees should increase, making it a strong hedge against inflation.

Visa reported 10% year-over-year growth in payments volume and processed transactions in its third quarter of fiscal 2026 (ended June 30). Net revenue jumped 14%, with management expecting low-double-digit percentage range growth. While an economic slowdown or recession could hurt transaction volume, the current outlook is stable.

Wells Fargo is another stock that can handle elevated interest rates. Typically, banks benefit from rising rates when the yield curve is steep. However, the spread between the yields on the two- and 10-year U.S. Treasury notes has been flattening lately. Despite this, net interest income (NII) has moved higher during the past year, making up over 54% of total revenue at Wells Fargo in the second quarter.