“Look no further than the President’s recent mention in an interview with Bloomberg that he was considering breaking up the big banks. While the comment momentarily shook the industry’s biggest players – Bank of America, JP Morgan, and Citigroup all saw sudden volatility – it was another in a continuing series of positive sentiments for regional banks,” Jablonski said.

Nevertheless, some warn that deregulation and reforms would likely take years to materialize.

Another headwind may come from the consumer sector, notably waning automobile loans. U.S. light vehicle sales came in below estimates in March and were lower from January and February. Banks have accelerated the number of these types of loans to offset revenue as the mortgage market slumped. Jablonski cautioned that regional banks may suffer if sales and loans continue to fall off.

Opportunistic traders who want capitalize on the short-term volatility have a number of leveraged and inverse ETF options to enhance potential returns. For instance, the Direxion Daily Regional Banks 3x Bull Shares (NYSEArca: DPST) can capitalize on short-term views on further strength in the financial sector, or the Direxion Daily Regional Banks 3x Bear Shares (NYSEArca: WDRW) can express short-term hedge of the opposite.

For more information on the banking sector, visit our financial category.

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