RBC's Cassidy Predicts Fed Rate Cuts by June 2026 Will Boost Bank Stocks

On December 29, 2025, RBC Capital Markets analyst Gerard Cassidy appeared on CNBC’s “Squawk on the Street” to discuss the financial sector’s record run and his 2026 outlook, predicting Fed rate cuts by June 2026 will further fuel bank stock gains [1].

The financial sector has seen strong performance in 2025, with JPMorgan Chase (JPM) up 35.49% year-to-date (YTD) and Bank of America (BAC) up 25.49% YTD [0]. On the event day, the sector posted a modest 0.34201% decline, a single-day movement against this multi-month trend [0].

Current Fed policy shows three consecutive 25-basis-point rate cuts in 2025, bringing the federal funds target range to 3.5%-3.75% [3]. While the Fed’s dot plot indicates only one more cut in 2026, market expectations from Forbes suggest the bulk of cuts may occur in the first half of 2026, with rates reaching ~3% by December 2026 [2]. Lower rates could benefit banks by stimulating loan demand, improving net interest margins (if long-term rates fall less than short-term), and reducing funding costs. Both JPM and BAC have strong financial positions and consensus “Buy” ratings [0].

1. Alignment with Market Expectations
   : Cassidy’s prediction of H1 2026 rate cuts matches broader fixed income market forecasts, indicating a consensus that rate easing will occur sooner than the Fed’s official dot plot suggests [2].
2. Multi-Factor Sector Drivers
   : The financial sector’s 2025 rally reflects factors beyond potential rate cuts, including strong bank balance sheets (e.g., JPM’s 16.42% return on equity) and economic resilience, which could amplify future gains if rate cuts materialize [0].
3. Policy Uncertainty Gap
   : The difference between market expectations (multiple H1 2026 cuts) and the Fed’s dot plot (one 2026 cut) creates a key uncertainty that could impact bank stock performance [3].

• Fed Policy Uncertainty
  : If inflation persists or economic growth accelerates, the Fed could delay or reverse rate cuts, leading to bank stock underperformance [3].
• Economic Slowdown
  : A recession could reduce loan demand and increase default rates, offsetting any benefits from lower interest rates [0].
• Interest Rate Volatility
  : Sharp rate changes (in either direction) could create volatility in bank earnings and stock prices [0].

• Loan Growth Surge
  : Rate cuts could stimulate consumer and business borrowing, boosting bank revenue from interest income [0].
• Margin Expansion
  : If long-term rates decline less than short-term rates, banks could see improved net interest margins [0].

This analysis provides context for understanding the potential impact of Fed rate cuts on bank stocks. Key data points include:

• JPMorgan Chase (JPM) YTD performance: 35.49% [0]
• Bank of America (BAC) YTD performance: 25.49% [0]
• Current Fed funds rate range: 3.5%-3.75% [3]
• Market expectation for December 2026 rate: ~3% [2]

Investors should monitor monthly inflation/employment data, Fed FOMC communications, bank earnings reports, and loan growth indicators to assess the likelihood of Cassidy’s prediction materializing. The analysis does not provide specific investment recommendations.