Bank Stocks Love Money and Right Now, They are Betting For a Trump Win - Here's Why...

Let’s get one thing straight: banks don’t openly throw on MAGA hats and chant “Trump 2024,” but behind closed doors, they’re probably rubbing their hands together at the thought of a second Trump term. Why? Because, historically, Trump is good for their bottom line. And for banks, that’s all that really matters.

(Source: Giphy) 

You see, when Trump took office in 2016, Wall Street threw a friggin ‘party. Bank stocks shot up 20% in just three months, mainly because the administration rolled back some of the strict regulations that had been choking the financial sector since the 2008 meltdown. Less oversight meant more room to play, and guess what? The banks cashed in.

Fast forward to today, and banks find themselves in a bit of a pickle. The economy’s been pretty resilient, interest rates are high, and with merger and acquisitions (including IPOs) down for the year - the future is looking a bit hairy, especially with Election Day looming.

(Source: Yahoo Finance) 

If Trump wins, banks are betting on a return to the good ol’ days of looser regulations and more corporate mergers. Which is bigly since mergers equal fat profits for Wall Street. Kamala Harris, on the other hand, is more likely to keep the regulatory pressure turned up to 11, continuing Biden’s trend of being a thorn in the side of the nation’s financial giants. As one KBW analyst put it, “If the election goes to Harris, I would think banks would sell off.” Translation: the market’s already pricing in a Trump win, and banks are loving it.

(Source: Fortune) 

But, but, but… here’s where things get a bit tricky for Wall Street’s greed: a little thing called Basel III. Basically, it’s a set of rules that forces banks to keep more cash on hand (you know, just in case of another global financial clusterf**k). Naturally, banks hate it. It ties up their money and leaves them less freedom to do what they love most—making more money.

(Source: Giphy) 

Under Biden, the rules were set to get even stricter. But some regulators started to back off after banks threw a tantrum (and maybe hinted at a lawsuit). If Trump wins, expect banks to pop champagne and throw dolla bills because there’s a good chance those rules will get scrapped or watered down entirely. 

Harris, though? She’s not going to be as lenient. If she wins, expect the capital requirements to stay in place, meaning banks will have to keep more cash on hand, limiting their ability to throw money into high-risk, high-reward ventures. In other words, not exactly a banker’s dream… AND not exactly the magic that minted America’s financial dominance in our modern world. 

(Source: Reuters) 

What’s more is that the two candidates have different views on personnel within the banking sector. Trump is set to replace up to eight top regulators, including leadership at the SEC, OCC, and even the Federal Reserve. That’s a huge deal because these are the people who decide how much leash the banks get (a.k.a. More industry-friendly and less hurdles for M&A and investment banking altogether). 

(Source: Giphy) 

Harris, on the other hand, has made it clear she’s not looking to be the banks’ home girl. She’s got a history of going toe-to-toe with big banks back when she was California’s attorney general, and she’s not likely to let up if she wins. Meaning, expect more aggressive oversight, more rules, and—sorry, Jamie Dimon—more of that “onslaught” of regulations that banks get in a pissing match with the government over.

In the end, the choice is pretty clear if you are a bank: Trump means more mergers, fewer rules, and a chance to keep cashing in. Harris? Not so much. Now on the surface, more oversight on banks and “making corporations and billionaires pay their fare share” sounds nice. But like Reagan put it, there’s always a hidden tax that most people don’t realize with regulations, oversight, and taxes on banks (and corporations). Whereas, even though most Americans absolutely despise Wall Street Banks and their insatiable level of greed (at no cost) - at the end of the day, guess who ends up paying for it? Peasants like you and I. 

(Source: Giphy) 

But alas, regardless of who wins, the one thing we know for sure about going into tomorrow’s fiasco is that banks will always find a way to survive. After all, as one bank CEO put it, “We’re kind of like cockroaches in that way. We’re gonna still be here…” LOL, classic.

In the meantime, get your bets in order for whatever follows after tomorrow's results (even though we may not 100% know until Thursday/Friday), but still… be prepared especially if you're an investor in banking stocks. As always, stay safe and stay frosty, friends! Until next time… 

P.S. Our “Wild Friday” alert delivered a 116% move in just minutes… If you’re tired about hearing about these trades AFTER the fact (and how we’re averaging a 100%+ winner every single week) Click here for the details on how to become a Stocks.News Premium Member.

Stocks.News does not hold positions in any companies mentioned in the article.