Thanks to the Fed’s turn of eagles, Bank of America stocks continued their good performance last year in the new year. This Friday’s trading day rose more than 10%, reaching a record high.
The KBW Bank Index, which tracks the 24 largest banks in the United States, rose more than 10% this week, writing the strongest five-day gains in the opening year, and the index just wrote the strongest annual gains in seven years in 2021.
Raymond James analysts Wally Wallace and David Long and others said that investors’ increasing interest in bank stocks is related to two major catalysts: rising interest rates and accelerating loan growth. The Fed hinted in the December meeting minutes released this week that it may raise interest rates faster and earlier, providing additional motivation.
Banking stocks will face the test of the earnings season
However, some analysts questioned the continued strong performance of bank stocks in the beginning of the year. Baird analyst David George said: “Investors are eager to seize the train of rising interest rates, allowing some well-known banks to perform well this week. Continue to rise. Bank stocks’ risk/reward trade-off (risk/reward trade-off) is biased towards the less attractive end.”
Banking stocks will face the test of the earnings season next, Wells Fargo (WFC-US),JPMorgan (JPM-US) Waka Flag Bank (C-US) Starting next Friday (January 14), the fourth quarter earnings season for US companies will kick off.
The market expects that the fourth quarter financial report of banking stocks will continue the good performance of the third quarter, but the Omicron variant will test consumers and investment needs.
Wedbush analyst David Chiaverini said: “The loan growth in the first quarter may be due to a slowdown in Omicron, but we are optimistic that loan growth will return to an upward track during the next period to the end of the year.”