Citigroup has avoided the headwinds that hurt smaller lenders. Shares are up 4% this year compared with a nearly 20% decline in the KBW Nasdaq Bank Index.
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Even banks that aren’t part of the merger bonanza can expect to see positive effects from a wave of consolidation. Dreamstime
After a relatively dormant 2020, Wall Street expects a surge of bank mergers this year.
The economic impact of the coronavirus pandemic dampened much of the expected merger activity for 2020 even as it served to intensify the rationale for why banks should combine. Last year, amid the worry over low interest rates and potentially ballooning loan losses, banks were busy navigating through their own issues and less interested in acquiring banks that could potentially bring their own set of problems. But with many of the worst-case scenarios for the economy thankfully avoided, banks are coming out of the crisis feeling a renewed pressure to become more efficient.
The Federal Reserve building Olivier Douliery/AFP via Getty Images
Bank investors might have thought they had reasons to fear a Democrat-controlled government. The prospect of higher taxes and increased regulation implies weaker earnings for the sector.
But historical data collected over nearly 70 years suggests that bank investors not need to worry much about a Biden administration and Democrat-controlled Congress.
Since the Nov. 3 election, bank stocks, as measured by the
KBW Bank Index (ticker: BKX) have soared 31%, outpacing the 10.6% gain in the
S&P 500 over the same period. Bank stocks also got a boost last week after Democrats Jon Ossoff and the Rev. Raphael Warnock prevailed in the Georgia Senate runoffs, giving the party a slim majority in the Senate and control of Congress.
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IBM [IBM], here we come just maybe,” Gross wrote, noting that the tech company recently traded at 10 times earnings and offered a 5% yield.
Tesla (TSLA), is “definitely overvalued,” in Gross’ view, due in part to the run-up it saw from Robinhood traders he referred to as “groupies.”
As for where Gross is putting his money these days, he favors natural-gas pipeline stocks, which offer yields between 9% and 12% and, in some instances, tax advantages. Magellan Midstream Partners (MMP), BP Midstream Partners (BPMP), and Enterprise Products Partners (EPD) are among his picks. The three were all up more than 3% on Tuesday, while the S&P 500 gained 0.7%.