Need to Know: Big bank stocks have plenty of juice left — here’s why

J.P. Morgan JPM, +0.54%  and Wells Fargo’s WFC, -0.17%  earnings are arriving on Friday, and takes on the financial sector have been hitting as well.

Buying the sector’s stocks right now makes sense to Above the Market’s Bob Seawright.

“This trade doesn’t seem ‘past it,’” writes Seawright, chief investment officer at Madison Avenue Securities, whose take served as a call of the day for our Need to Know column.

The big financials ETF XLF, +0.49%  remains below its 2007 peak, and the sector’s 10-year return lags the S&P 500’s, he notes. Plus, banks and their ilk are cheaper than the broad market.


As the Trump administration hands out reprieves to banks, Seawright gives a related reason why Wall Street bosses are smiling.

New Federal Reserve chief Jerome Powell “will likely be inclined toward less regulation, another reason to favor financials in 2018,” Seawright says in his post out this week.

See: Bank earnings will be ‘moderate’ and ‘muddied,’ but there’s good news

Rising rates and tax cuts should provide a boost, too, with the latter described by other pundits as nice for banks in the long run, after some short-term pain.

“Financials should be helped by higher interest rates (and thus higher profits), corporate tax relief (banks are some of the nation’s highest corporate taxpayers), and an economy growing by nearly 3 percent annualized,” Seawright says.

That might help cheer up a Bernstein analyst who has been highlighting how financial types fritter their lives away on spreadsheets and hanging around airports.

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