After a strong rallying follow the presidential elections, U.S. equities and stock exchange traded funds are stuck in tight range and even weakened as investors pared down bets ahead of Donald Trump’s presidential inauguration on Friday.
Dragging on the equities markets, banks and energy stocks weakened.
Bank stocks slipped after rising in late Wednesday following comments from Federal Reserve Chairwoman Janet Yellen, whom expected the central bank to steadily increase interest rates in the coming years, the Wall Street Journal reports. Market watchers anticipate higher rates to bolster banks since the lenders may also raise their lending profits.
However, traders believe that the financial sector, one of the strongest areas since the elections, may be stuck in sideways trading until after Trump’s inauguration, with focus turned back to what policies the new administration can push through Congress during his honeymoon period.
“We’re transitioning from this phase of hope into one where people are waiting for real action,” Jimmy Chang, chief investment strategist at Rockefeller & Co., told the WSJ.
Financial traders are looking for Trump to cut down on regulation, reduce taxes and increase fiscal spending. Banks in particular would strengthen if Trump rolled back some of the harsher rules set under Dodd-Frank and other post financial downturn regulations. Additionally, Trumps expansionary policies would further solidify the Fed’s tightening monetary policy, which would further help lenders.
“We may give Trump the benefit of doubt in the first hundred days but unless we see some legislation being passed through Congress, this hype might turn into gripe and that ends up being a trigger for the digestion of gains,” Sam Stovall, chief investment strategist at CFRA Research, told Reuters.
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