The U.S. stock market surged in 2017, helped by significant growth in aerospace and technology stock prices. While tech has been the most popular industry for investment in the past 13 months, stocks in the banking industry should not be overlooked by new investors or experienced investors who are looking for new opportunities in 2018.Bank stocks should be healthy throughout this year and into the foreseeable future.
Sweeping changes in the regulatory environment have made banks more stable, creating better market conditions for investors. The tax changes in the United States will also make a difference by reducing the amount of tax paid by corporations. Not only will the tax rate benefit banks directly, but it could also lead to increased deposits and high cash reserves for banks both large and small. This could then mean more investment and higher profitability. U.S. monetary policy has also seen changes since the Trump Administration has been in in the White House, and these could benefit banks, leading to better financial performance and more valuable shares.
To put it simply; the banking industry looks to be entering a new era of financial stability and growth. 2018 should reveal some positive financial results from the major banks, as most used the fourth quarter to adjust their tax structures and account for any significant losses. Essentially, the industry will start with a fresh financial sheet.
Bank Stocks Will Remain Profitable
Perhaps the best news for investors, is knowing that the banks will remain profitable for as long as the economy continues to grow. The only way that the banks could start losing money (and dropping share prices) is for the United States to experience a widespread recession. With the economy on an upward trend and interest rates slowly increasing, it’s highly unlikely that a recession could develop at any time in the next 12 months. Even looking ahead two, three, or even five years into the future, the threat of a recession seems nonexistent.
Looking at some of the major banks, a stable upward trend is already developing. Bank of America (NYSE: BAC) stocks have increased by just under $10 since September of last year. Wells Fargo (NYSE: WFC) has gone from $49 per share in mid-September of 2017, up to $65 per share as we head towards the end of January. JP Morgan Chase & Co. (NYSE: JPM) Has experienced similar growth over a six-month period, going from a low of $88 in September 2017 up to over $114 as of January 24.
Anyone looking for smart investments in 2018 should seriously consider the stock market, and bank stocks could increase the value of many investment portfolios.
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