Wells Fargo is trading near its 52-week high
Wells Fargo (WFC) has long been one of the largest of most valued financial institutions in the United States. It became one of the most valued banks after the financial crisis because of its ability to recover and small exposure to market-related activities. However, the bank’s shares fell hard with the news that US regulators were fining the bank $185 million for opening fraudulent accounts. JPMorgan Chase (JPM) overtook Wells Fargo (WFC) as the largest bank by market capitalization. Most of these losses, however, were erased in the post-election bank rally. Wells Fargo now trades close to its 52-week high.
In 2016, Wells Fargo’s shares underperformed the financial sector, as well as broad markets. The Financial Select Sector SPDR ETF (XLF) represents the financial sector, while the S&P 500 SPDR ETF (SPY) represents the S&P 500. By the end of 2016, the financial sector had returned 23% and SPY had gained 12%. In comparison, Wells Fargo returned 4.4%.
Performance of peers
In 2016, the financial sector was on a roller coaster ride due to the low interest rate outlook and fears of a global recession. Although banks entered 2016 expecting four rounds of rate hikes, things did not turn out in their favor. Macroeconomic uncertainty led to delays in rate hikes. However, banks have erased their losses in the last month on expectations of rate hikes, economic growth, and fewer regulations after Trump’s victory
Since November 8, Wells Fargo’s shares have gained 21%, while Bank of America’s (BAC), JPMorgan Chase’s, and Citigroup’s have gained 32%, 22% and 20%, respectively. The Financial Select Sector SPDR ETF (XLF) has risen 17%.