Buy bank shares!
That’s the overwhelming consensus among strategists heading into 2025. Well-known names such as Savita Subramanian of Bank of America, Brian Belski of BMO and Chris Harvey of Wells Fargo are among the bulls for financial stocks.
The catalysts are clear: a strong economy, expectations of deregulation under new President Donald Trump, attractive valuations and lower interest rates.
Harvey recently highlighted the sector’s attractive prices in a note to clients, writing that money managers “must finally pay attention to this sector”, while Belski wrote in his 2025 outlook that the financial sector remains “drastically unloved” despite strong profit growth expectations and compelling valuations. .
The market is already starting to reflect that optimism. The Financial Sector Fund (XLF) has soared following the victory of newly elected President Donald Trump last month. It is among the best-performing sectors, up nearly 7% since November 5, outperforming the broader S&P 500 benchmark.
“There is about $7 trillion in cash money market funds that are starting to find their way into the market. It starts with fixed income and could extend to equities,” Alex Blostein, senior analyst at Goldman Sachs Global Investment Research, told me on Yahoo Finance’s Catalyst earlier this week. “All these things look very bullish for the financial sector in 2025.”
The optimistic sentiment is not limited to strategists and analysts; we also hear it from the leaders of major banks. Bank of America (BAC) CEO Brian Moynihan told Yahoo Finance’s Brian Sozzi at the Invest conference last month that he has confidence in the US economy under Trump and expects the administration to “get off to a good start.” .
Executives from JPMorgan (JPM) and Goldman Sachs (GS) expressed similar optimism at Goldman Sachs’ Financial Services conference last week. Goldman Sachs CFO Denis Coleman said he sees “an increased level of optimism” heading into 2025, while Marianne Lake, CEO of JPMorgan’s Consumer & Community Banking, predicted a rise in investment banking fees.
“The intensity of our customer dialogues is increasing. … There is certainly greater confidence among CEOs and customers that more could happen through larger-scale transactions, that more strategic activity could happen,” Coleman said at the event.
The gradual recovery in the IPO market is seen as a new tailwind. While activity remains well below 2021 peak levels, the pace of public debuts is accelerating. Since the start of the year, 158 companies have gone public in the US through a traditional IPO – a 35% jump from 2023, according to Dealogic data.
It’s a trend that’s expected to accelerate next year, as a better economy and lower interest rate environment are expected to lure companies from the sidelines. The strong public debut this week for software company ServiceTitan (TTAN), whose shares rose more than 40% on its first day of trading, is adding to the bullish sentiment.
“Financial institutions have legs,” Aadil Zaman of the Wall Street Alliance Group told me on Morning Brief. “Fed terminal rates will fall and banks will benefit from increased investment banking activity.”
Jake Manoukian, US head of investment strategy at JPMorgan Private Bank, told me his team is looking at the financial and asset management sectors for their 2025 portfolio.
“There’s a clear sense that this will be a friendlier administration toward Wall Street and in dealmaking,” Manoukian said.
There is priority for the sky-high enthusiasm. Financial services have long been seen as a top business activity under Republican administrations amid expectations for looser regulation, creating a more favorable environment for banking and dealmaking.
Seana Smith is an anchor at Yahoo Finance. Follow Smit on Twitter @SeanaNSsmith. Tips about deals, mergers, activist situations or something else? Email seanasmith@yahooinc.com.
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