SA Asks: How will the U.S. election results impact financial stocks?
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Now that Election Day is over, investors will be eager to find out how the results will impact specific sectors.
Which brings us to our latest SA Asks question: how will the U.S. election results impact financial stocks?
We asked Seeking Alpha analysts Mark Dockray, Noah Cox and Jonathan Weber to weigh in on the topic.
Mark Dockray: It looks like the Republicans have had a strong night, possibly winning control of both Congress and the Executive Branch. In terms of what that might mean for financials, a laxer regulatory backdrop appears to be a likely outcome. I expect to see bank M&A activity pick up pace, with oversight and deal timelines having increased in recent years.
Potential consumer protection measures, like tackling so-called junk fees, are probably off the table, which was a potential headwind facing smaller regional and community bank stocks. More broadly, the regulatory burden falls more heavily on the larger banks. I’d expect a lighter touch environment to benefit them disproportionately.
As for possible negatives, tariffs look more likely, and that could lead to volatility in the shares of banks with significant cross-border businesses.
Noah Cox of Noah’s Arc Capital Management: With Former President Trump winning the election, I expect financials of all sizes to do well. I particularly expect small financials to benefit as a looser regulatory environment helps small banks compete in a fiercely competitive banking environment.
Jonathan Weber, Investing Group Leader for Cash Flow Club: Donald Trump winning the election should have a positive impact on bank stocks. Less banking regulation could reduce operating costs for banks, while more lenient M&A regulation could result in higher M&A fees for investment banks as more major deals will happen.
Interest rates are rising on the news of a Donald Trump win on the expectation of higher budget deficits — it remains to be seen how this will impact Fed policy down the road. With Donald Trump’s stance on corporate taxes, investors won’t have to worry about tax hikes that could have pressured banks’ profits.