Atlantic Equities reported Friday that CME Group shares are on the verge of a rebound due to Fed rate hikes. CME Group analyst Simon Clinch elevated the stock from overweight to a recommendation to clients on Friday. Clinch stated that CME Group could benefit from a rising interest rate environment. There is a path to substantially higher earnings power when interest rates volumes return from the suppressed levels of post-pandemic. We believe this will be facilitated by higher rates, rising inflation and higher bond yields. Also, there may be a greater base of US Treasuries outstanding. Clinch pointed out that CME Group is able to perform even under tightening Fed rates, and that it pays a forward dividend yield exceeding 4%. Although shares have dropped 13.4% in the last year, they may make a rebound. According to Thursday’s closing, the firm kept its target price of $235. This implies that the stock could return around 19% from this point. Clinch explained that they had earlier downgraded the stock in 2022 because of concerns that inflation expectations would have driven the stock’s valuation above its fundamentals. We now think that the stock is attractive and offers a return of our target price. — CNBC’s Michael Bloom contributed reporting
