The re-election of Donald Trump has boosted investor optimism, as shown by record highs in the stock market, with the banking sector among the standout performers.
The market rallied anticipating Trump’s business-friendly policies, such as proposed corporate tax cuts. Analysts believe these tax changes could lead to a bullish stock environment.
Building on this outlook, the banking sector gained momentum given the increasing possibility of deregulation under Trump’s second term.
Picks for you
With most banking stocks showing strength, the sector presents an opportunity for investors. Investors could particularly benefit if the upward momentum continues into the Trump administration’s start.
For those considering the sector, below are two banking equities to consider for investment:
JPMorgan (NYSE: JPM)
JPMorgan (NYSE: JPM) presents a buying opportunity due to its diversified business model, which has proven profitable over the years.
Given the bank’s status, JPMorgan could benefit from the Republican administration, which has historically favored large businesses with friendly regulations.
In anticipation of such an environment, JPMorgan may gain more interest from increased business activities, such as initial public offerings and mergers. At the same time, the bank’s guidance for Q4 for interest income stands at $92.5 billion, with an implied $22.9 billion in net interest income.
Moreover, JPMorgan has reassured investors about its leadership stability, as CEO Jamie Dimon will remain at the helm, dispelling rumors of his potential exit to join the Trump administration.
While JPMorgan stock has shown significant short-term growth, there are also concerns about its stock valuation.
Analyst David George from Baird cautioned that, although the bank is “best-in-class,” sustaining the current momentum may be challenging.
As of press time, JPM shares were trading at $238.90, with a 3% loss in the last trading session but an almost 7% gain on the weekly chart.
Wells Fargo (NYSE: WFC)
Wells Fargo (NYSE: WFC) is another equity experiencing increased investor interest following Trump’s re-election.
Although the stock has shown short-term weakness, it remains a compelling pick. Its impressive revenue growth, particularly in its investment banking and trading divisions, makes it a solid buy.
On the other hand, Wells Fargo’s strategic positioning includes strong fee income and favorable net interest income, supported by an extensive share buyback program.
Compared to its peers, Wells Fargo has conducted the most aggressive stock buybacks in the last 18 months, repurchasing 6% of its stock in the first half of 2024.
The company is also recovering after regulatory hurdles, such as penalties for creating fake customer accounts, which capped its assets at approximately $1.95 trillion.
As of press time, Wells Fargo was trading at $70.83, having declined over 2% in the past 24 hours but up over 8% on the weekly chart.
Overall, stocks like JPMorgan and Wells Fargo are positioned to benefit from potential regulatory relief and favorable policies. Despite facing short-term challenges, their strong fundamentals make them solid picks for the moment.
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