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Shares of major US banks have shown resilience after reporting their third-quarter financial results, and this momentum may continue through the end of the year and into 2025, according to Anton Schutz, President and Chief Investment Officer of Mendon Capital Advisors.Schutz sees further upside for bank stocks, particularly as they historically perform better under a Republican administration.Recent polls suggest that Donald Trump is gaining ground in the 2024 presidential race against Kamala Harris, bolstering investor optimism.The Dow Jones US Banks Index has risen approximately 25% since the start of 2024, reflecting strong performance in the sector.
Why do bank stocks outperform under a GOP government?
Historically, Republican administrations tend to impose fewer regulations, which allows banks like JPMorgan, Wells Fargo, Goldman Sachs, and others to see higher stock prices.This regulatory environment helped bank stocks rally significantly when Donald Trump was elected president in November 2016.In addition to potential political tailwinds, individual factors could drive further gains in big bank stocks.For example, Wells Fargo may soon have its asset cap lifted, while a rise in mergers and acquisitions (M&A) activity could benefit Goldman Sachs and Morgan Stanley.For JPMorgan, continuing its strategy of underpromising and overdelivering is expected to sustain its stock performance, Schutz said during an interview with CNBC.Strong dividend yields also make these bank stocks attractive investments.
Schutz prefers regional banks over Wall Street giants
Although Schutz is optimistic about Wall Street banks, he believes regional banks offer even better value at current levels.Speaking on CNBC’s “Worldwide Exchange,” Schutz expressed his bullish outlook for regional banks, noting that they are trading at record discounts, both compared to the broader market and their historical averages.“In many cases, regional banks are trading at single-digit price-to-earnings (P/E) multiples and are potential takeover targets. This sets them up for better earnings and future M&A opportunities, something you won’t see as much with larger banks,” Schutz explained.He also noted that potential interest rate cuts could be a tailwind for regional banks.The Federal Reserve recently lowered its key interest rate by 50 basis points and signaled plans for another 50 basis point cut by the end of 2024, which could further support regional banks.More By This Author:Netflix Has A Real Problem Ahead Of Its Q3 Earnings Report: Find Out More
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