Bank of America Corporation (BAC) stock is currently trading at $25.58 in the pre-market session. The stock is up 1.47%, and climbing fast. Of course, the most important news for the banking industry will come from the Fed. On Tuesday and Wednesday next week, the Fed FOMC will be convening to discuss monetary policy, vis-à-vis the federal funds rate. The consensus among leading analysts and policymakers is that Fed chair Janet Yellen will pull the trigger on an interest rate hike. We can expect the FFR to increase to 0.75% – 1.00% in short order, driving up demand for the USD and propelling bank stocks to new highs. Bank of America is one such stock that is slated for liftoff.
What is News with BAC Stock this Week?
Believe it or not, the post-election surge in the price of Bank of America stock has been astronomical. Since November 8, 2016, BAC stock is up 51.84%. This is far greater than the impressive performance of the PowerShares KBW Bank ETF price change which is just 29.82%, and the S&P 500 index which is up 12.15%. However, a caveat is in order: regulatory reform will be necessary to help BAC stay at these lofty levels.
It is not enough for the White House to push a narrative that Congress or the Fed refuses to follow. Simply put: tough talk won’t matter if lawmakers do not approve of orders coming from the White House. The financial services industry is heavily regulated, and Trump campaigned to deregulate the financial sector ‘big-league’. Given the opposition he has faced on so many issues of late, it is unlikely that he will get his way with Congress.
If Trump’s plans to deregulate the financial services sector fail, BAC stock could be in for a rude awakening. The lofty increases in the stock price are impressive on paper, but not based on fundamentals at this juncture. Speculative sentiment is driving bank stocks. Traders are hoping that corporate taxes will be reduced in the region of 15% – 20%, and that layers upon layers of unnecessary regulation will be peeled back. This will likely be addressed with Dodd-Frank, which sought to impose checks and balances on big banks and centralize control over their activities with the government.
