It hasn’t been a great year for financial stocks so far, with the sector down about 10% so far this year.
Consumer finance stocks, which include many fintechs, are among the worst performers, dragging the sector down 21% so far this year.
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Some of those most affected in this area are Robinhood(NASDAQ: HOOD)a decrease of 39%, Say(NASDAQ:AFRM)40% less, and SoFi(NASDAQ:SOFI)a decrease of 38% so far this year. These three stocks delivered strong returns in 2025 and their valuations soared. In addition to viewing these stocks as overvalued, investors are concerned about a sluggish economy, rising credit risk, inflation, less trading in a bear market, and regulatory uncertainty, to name a few.
Investors seeking exposure to the financial sector may want to look at other areas of the sector that may be less prone to credit risk, declining markets and the economy. Here are three great options.
I’m going to group these two together because they are very similar.
Visa(NYSE: V) and MasterCard(NYSE: MA) They are the two largest payment processors. According to Motley Fool research, the two companies account for 76% of credit card purchase volume in the US and 69% of all cards in circulation. So they basically have a duopoly.
They differ from other credit card companies and consumer finance firms in one huge way: They are not lenders, so they have no credit risk. They make money from usage fees every time a card is used on their global networks.
They are also not particularly vulnerable to a cap on interest rates, as proposed by President Donald Trump.
The biggest hurdle for Visa and Mastercard would be a recession or economic slowdown, where volume drops. But historically, these two payment processing giants have done well during recessions because, while spending may have slowed, people still use debit and credit cards during recessions.
In the last two bad years for the S&P 500 (2022 and 2018) both Visa and Mastercard outperformed the benchmark.
And in their fiscal 2026 outlook, both companies expect strong consumer spending and double-digit percentage profit growth. One thing to keep in mind is the Credit Card Competition Act, which would require banks to offer at least two payment networks for merchants to process transactions, including one outside of Visa and Mastercard. This has been stalled in Congress for years, but is worth watching as it could have an impact.
Both companies have huge margins because they are asset-light, so they have plenty of cash flow to weather crises. Furthermore, both are reasonably valued and analysts are extremely optimistic about them.
About 93% of analysts rate Mastercard a “buy” with an average price target of $669 per share, which would indicate an upside of 34%. About 92% rate Visa a “buy” with an average price target of $408 per share, which would also represent a 34% upside.
Another good play at this time is Standard & Poor’s Global(NYSE: SPGI). This is another stock protected by moats as one of the two dominant players in the credit ratings business, along with Moody’s(NYSE: MCO). Together, S&P Global and Moody’s control 80% of the market.
S&P Global is also a dominant player in its indexing business, as the owner of the S&P indices, and has a strong market intelligence division that tends to perform well when markets are down. This combination gives S&P Global a balance of income streams that has typically served it well in a variety of market conditions.
Credit issuance is expected to increase 5% in 2026, up from 12% last year, but demand to build AI infrastructure will remain a major factor. There are some concerns about AI disrupting the market intelligence business, but some analysts think this is overblown, especially for companies like S&P Global, which has proprietary data and will likely use AI rather than be decimated by it.
As an added bonus, S&P Global is the Dividend King, having increased its dividend for 53 consecutive years.
The stock is also fairly valued, and like Visa and Mastercard, analysts are very bullish on S&P Global. 93% of analysts rate it a buy and have an average price target of $546 per share, which would suggest a gain of 33%.
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Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool has positions and recommends Mastercard, S&P Global and Visa. The Motley Fool has a disclosure policy.
My Top 3 Financial Stocks After the Latest Market Pullback was originally published by The Motley Fool
