What does a Trump victory mean for US banks?
Investors in financial stocks (XLF) had a week to remember after Donald Trump won the US Presidential election in an unprecedented upset. Financial stocks including JPMorgan Chase (JPM) and Bank of America (BAC) posted one of the biggest rallies in recent years, with investors gaining confidence that a Trump presidency will mean fewer regulations, more infrastructure spending, and a steepening yield curve. Investors expect banks to reap huge benefits from higher interest rates, lighter regulations, and lower administrative burdens under Trump.
Specifically, Trump has suggested that he wants the Dodd-Frank Act, a financial overhaul law, to be repealed, or at least cut back. He has called Dodd-Frank a “disaster” and a “disgrace,” embracing the view held by most Republicans and business interests that the protective regulations and safeguards have increased costs and killed economic growth. Trump has also repeatedly claimed to support higher infrastructure spending and is in favor of a larger budget deficit.
After the surprising election results, several analysts shared their opinions on stock markets under a Trump’s presidency. Tom Michaud, Chief Executive at Keefe, Bruyette & Woods said, “There will be a re-examination of regulation across the financial industry. But I think it will be focused on smaller banks.”
Goldman Sachs (GS) Chairman and Chief Executive Officer Lloyd Blankfein said at the New York Times Dealbook conference on Thursday that “If you want to be good for bankers, you have to have policies that would be good for economic growth.” And many agree that regulatory relaxation and increased fiscal spending in a Trump presidency could benefit stock markets and the economy.