The COVID-19 pandemic had an adverse effect on the financial industry as the deep uncertainty about economic activity led to the Fed cutting the federal funds rate to a range of 0% to 0.25%. However, last year, the Fed raised interest rates seven times, taking its benchmark interest rate to a range of 4.25% to 4.5% at its December meeting.
While most sectors suffered from a rising interest rate environment, financial institutions benefited primarily due to the positive correlation of their revenues with interest rates.
