Higher Rates Aren't So Bad for Banks, After All

It's an old saw -- higher interest rates are bad for banks. So every time interest rates tumbled this year, as they did throughout August, bank stocks rallied.

But the conventional playbook about rates and financial stocks may not be accurate in the current environment, which should prompt a re-evaluation of the sector's recent strength, and what it says about the outlook for the economy and Federal Reserve policy.

Financial stocks are "not very well understood," (RPFGX Quote)Davis Financial fund co-managers Christopher Davis and Kenneth Feinberg wrote in their summer commentary. "Rising interest rates do not inherently threaten profitability at all financial service companies." ...