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Why JPMorgan, Wells Fargo, Bank of America, and Other Bank Stocks Rose Today

By Joe Tenebruso - Jan 7, 2021 at 7:35PM

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A Biden bull market could be about to begin.

What happened

Bank stocks climbed on Thursday, following key Senate elections and Congress' confirmation of President-elect Joe Biden's victory. By the close of trading, shares of JPMorgan Chase ( JPM -1.81% ), Wells Fargo ( WFC -2.37% ), and Bank of America ( BAC -2.27% ) were up 3.3%, 2.3%, and 2.2%, respectively. 

So what

Biden's victory combined with effective control of both the Senate and House of Representatives will make it easier for the Democrats to pass sweeping stimulus programs. These measures could help to reinvigorate the economy, which would be a boon for banks.

A person is pointing to an upwardly sloping digital chart.

Shares of the major banks rose sharply on Thursday. Image source: Getty Images.

A stronger economy would likely lead to fewer loan losses for banks, as well as greater demand for loans and other financial services. Additionally, an economic recovery could also drive interest rates higher. Banks' net interest margins tend to improve as rates rise.

Now what

Analysts have been ramping up their price forecasts for the major bank stocks in recent days. Jefferies analyst Ken Usdin sees JPMorgan's revenue and earnings increasing steadily as it takes share from smaller competitors. Meanwhile, Barclays analyst Jason Goldberg estimates that Bank of America can grow its per-share profits by more than 50% over the next two years, due in part to lower loan losses and larger stock buybacks. 

Lastly, while Wells Fargo remains behind its peers in several key metrics, Usdin expects its cost-cutting initiatives to pay dividends as it progresses with its turnaround strategy. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

Wells Fargo & Company Stock Quote
Wells Fargo & Company
WFC
$47.75 (-2.37%) $-1.16
Bank of America Corporation Stock Quote
Bank of America Corporation
BAC
$43.87 (-2.27%) $-1.02
JPMorgan Chase & Co. Stock Quote
JPMorgan Chase & Co.
JPM
$158.29 (-1.81%) $-2.92

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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