“For some context, the regional banks as a group rose 21 percent in the month following the U.S. election in November. Regional banks differ from ‘big banks’ in the size of their operations and in the scope of their services, focusing on taking deposits, making loans and providing credit card services,” reports CNBC.
Politics are also boosting bank stocks. President-elect Donald Trump’s official transition website stated that the “financial Services Policy Implementation team will be working to dismantle the Dodd-Frank Act,” which was signed into law by President Barack Obama in 2010 to obviate another financial downturn. The law increased the burden of banks to safe guard against another meltdown event and forced many to greatly reduce exposure to riskier assets, which have also dragged on the financial sector’s bottom line.
Unfortunately for some that are bullish on the financial service sector, with the Fed looking dovish even after its recent rate hike, politics might be the lone remaining catalyst for the sector for a while and that could weigh on regional banks that were hoping for a more hawkish Fed.
Miller Tabak equity strategist Matt Maley “observed that the spread between the 2-year and 10-year U.S. Treasury notes has fallen from 1.35 percent to 1.19 percent since late December. And if the curve flattens further, “the group could break-down,” according to CNBC.
For more information on the banking sector, visit our financial category.