The election of Donald Trump brought with it a considerable rise in many U.S. bank stocks, on the notion proposed during the President-Elect’s campaign of reduced regulation and a generally more laissez-faire approach to the banking sector.
Significant increases experienced by U.S. banking giants such as Citi Group, Bank of America and JPMorgan Chase subsequent to the election of Donald Trump are predicted by many to continue their increase after his inauguration.
Famous investor Steve Eisman, famed for his bearish predictions on the U.S. subprime bubble years prior to its bursting, has been quoted by the Financial Times for his bullish stance on U.S. banking stocks. Citing the increase in the capacity of banks to increase the debts they maintain, authorised by a reduction in regulation, to be instrumental in raising their share prices.
Many U.S. banks maintain share prices considerably lower than those sported prior to the financial crisis. Having made a limited recovery compared with many other U.S. stocks, when considering the banking sector as a whole.
A general increase of U.S. bank stocks is the trend predicted by many, however there are periods of particular increase expected by many analysts prior to the assumption of this more gradual trend.
The first is the inauguration of Mr. Trump – and the ‘Trump Rally’ likely to follow. Many analysts are predicting a rapid increase in share prices for U.S. banks during the first 100 days of his presidency, similar to the bullish momentum expressed after his election.
A ‘cool-down’ period is then predicted – with bank stocks still ascending, but at a more gradual pace. This however is expected to be enhanced by the various stages of unravelling anticipated concerning restrictions imposed upon banks during the Obama administration in response to the financial crisis.
Such a reduction of regulation is expected to once more provide stimulation for another bullish rally. Although the general notion maintained amongst analysts is one of optimism regarding U.S. bank stocks, few are anticipating a return to the highs enjoyed by many U.S. banks prior to the financial crisis for some time, as U.S. bank stocks still remain a considerable distance away from their pre-crisis highs.
Chart from: https://www.dailyfx.com/charts
Showing the increase in the price of Citigroup shares since the election of Donald Trump.
Financial Times article about Steve Eisman’s bullish stance on banking: https://www.ft.com/content/b2856ede-c7cf-11e6-8f29-9445cac8966f