What happened
Shares of Bank of America (BAC -0.26%) rose nearly 12% last month, according to data provided by S&P Global Market Intelligence, as investors looked ahead to an eventual end to the coronavirus pandemic.
So what
Bank stocks tend to perform well as the economy strengthens, when demand for loans rises and default rates decline. Additionally, interest rates have been rising along with investors' expectations for a recovery, a dynamic that typically boosts banks' profit margins. With the U.S. and other countries ramping up their COVID-19 vaccinations and stimulus measures, many market watchers expect these trends to continue in the months ahead.
With its profits set to surge, investors have bid up Bank of America's stock price in recent weeks. Image source: Getty Images.
Along with these macroeconomic factors, cost-reduction initiatives and technology investments are benefiting Bank of America's profitability. The banking giant has closed underperforming branches in recent years and directed more of its spending toward its mobile app. With more people performing their banking online every day, these moves should help strengthen Bank of America's competitive position.
Now what
Bank of America's stock price is now up 30% so far in 2021, yet its stock still trades for only about 1.3 times book value and offers a solid 1.8% dividend yield. With its profits set to rise further as the economy continues to recover, investors can expect this banking leader to deliver even more share price gains in the months ahead.
