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Why B of A Is Just Holding on Today

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Bank of America (NYSE: BAC  ) is up healthily in the first hour of trading, after finishing up yesterday by a penny. So far, the rest of the Big Four and the major market indices are in the green, as well. After yesterday's sideways-trending market, it looks like B of A and company are solidly back into positive territory, but don't expect too much.

Waiting is the hardest part
There's a lot of general uncertainty in the markets right now, at home and abroad. The world is waiting to see when and how the Federal Reserve will dial back quantitative easing: the dollar-spigot widely believed to be behind America's nascent economic recovery, and a source of capital for emerging markets, as well.

The dialing back isn't just a question of if, but when: Ben Bernanke and company have made it clear that as the economy improves, the Fed will begin scaling back its monthly bond purchases, potentially as early as the next few months.

Regarding B of A itself, investors are waiting to hear the outcome of a trial currently under way in New York. The judge's decision will determine if an $8.5 billion settlement made in 2011 with Bank of New York Mellon (NYSE: BK  ) and bond giants BlackRock (NYSE: BLK  ) and PIMCO will stand, or if the superbank will suddenly find itself on the hook for potentially tens of billions more.

Foolish bottom line
Nothing too shocking has come out of said trial, except for the slightly eyebrow-raising revelation that B of A considered putting Countrywide Financial -- the business unit at the heart of the issue -- into bankruptcy. Regarding the trial itself, it's scheduled to end this Friday, but it's unlikely investors will get any breaking news from the judge soon. These things take time, and the stock may languish a bit until the situation is more clearly resolved.

As for uncertainty in the markets, it's hard to say when or if that's going to go away. There's no deadline to look forward to regarding the end of QE. When the Fed does begin dialing it back, there will undoubtedly be jolts as investors adjust. But QE couldn't have gone on forever. The idea was to get the country back to a normally operating economy after the financial crisis. We may be getting there, but it will mean change, and change scares people.

This all goes to show that's it's very difficult to pin down the exact cause or causes for the day-to-day movement of a stock, which is why here at The Motley Fool, we counsel investors to take a long-term view of investing. Tune out the market noise -- like the kind we're seeing today -- and tune into the fundamentals of the companies you're invested in. Your portfolio will thank you, even if your broker won't.

Looking for in-depth analysis on Bank of America?
Look no further than this Motley Fool premium report -- written by top Motley Fool banking analysts Anand Chokkavelu and Matt Koppenheffer. They'll help you lift the veil on the bank's operations, and give you three reasons to buy and three reasons to sell along the way. And with included quarterly updates, this could literally be the last bit of investment research on B of A you'll ever need. For immediate access, simply click here now

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9/28/2016 9:43 AM
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