These 3 under-the-radar stocks could rally if Fed raises rates this week

The Federal Open Market Committee enters its September 15–16 meeting with interest rate futures pricing in a more than 85% probability of a 25 bps hike.

August core CPI data running hot for a second consecutive month alongside Chair Kevin Warsh’s hawkish stance at Jackson Hole forced markets to abandon easing expectations.

While higher borrowing costs strain stocks in general, a rate hike may actually benefit a select group of specialty finance firms in terms of earnings growth.

Three of those names experts believe could particularly benefit from higher interest rates are: Ares Capital, Starwood Property Trust, and Ladder Capital.

These three lenders maintain dominant floating-rate asset portfolios alongside well-structured liabilities that protect net interest margins if Fed policy shifts – making them resilient structural allocations rather than purely directional rate plays.

Ares Capital (ARCC)

As the largest publicly traded business development firm, Ares Capital deploys capital into private middle-market corporate borrowers.

Its $29.3 billion investment portfolio is 71% floating-rate – allowing loan income to reset upward instantly with each central bank tightening step.

The company doubled down on this yield sensitivity in the second quarter, originating 94% of its $2.6 billion in new debt commitments at variable rates.

Downside protection comes from the liability side of the balance sheet, where fixed-rate debt locks in borrowing costs, preserving net interest spreads as asset yields expand across monetary shifts.

This structural match has underpinned 17 consecutive years of a stable or growing dividend, which currently yields a whopping 9.7%.

Starwood Property Trust (STWD)

Starwood Property’s $32.2 billion portfolio makes it the premier commercial real estate mortgage REIT, diversified across commercial lending, owned properties, and infrastructure finance.

Variable-rate contracts dominate its balance sheet – 97% of its $17.3 billion commercial loan book and 96% of its $3.6 billion infrastructure book adjust alongside prevailing reference rates.

A 25bps increase in the Fed funds rate translates immediately into elevated interest collections from institutional borrowers.

Coupled with over a decade of uninterrupted dividend payouts, the firm’s current 12.3% yield rests on a commercial lending book engineered to capture immediate yield expansion while insulating underlying book value.

Ladder Capital (LADR)

Holding $5.8 billion in assets, Ladder Capital is a commercial mortgage REIT that mainly targets short-term floating-rate bridge loans for commercial properties undergoing renovation or lease-up.

First-mortgage loans comprise 49% of its total investment base – complemented by a liquid 33% allocation to commercial mortgage-backed securities and 18% in direct real estate equity.

The firm manages rate exposure by actively rebalancing capital between senior loans and high-grade securities, targeting a flexible 65% loan and 20% securities allocation framework.

Because short-term bridge debt resets rapidly following FOMC policy changes, Ladder generates expanding interest income while maintaining a 9.6% dividend yield ahead of the September 16 rate decision.