2016 Quite an Odyssey for the Banking Sector

2016 was a year of surprises. Things that no one thought possible happened and the markets reacted in ways not many anticipated.

But few industries (and stock market sectors) were impacted as much as the financials. The global banking community experienced its first major shock with the United Kingdom’s decision to leave the European Union back in June. Brexit had a negative effect on the U.S. banks, but fortunately it wore off relatively quickly and the stocks rebounded.

Then, the election came along in November and the unexpected win by Donald Trump surprised the markets in a big way. Expectations of tanking markets were shattered when stocks did the complete opposite and rallied to record highs, led by a massive move higher in bank shares. 

The possibility of a dismantling or complete revision of the Dodd-Frank regulations appears to have bank stocks on everyone’s Christmas list. The effect of reduced regulation would extend to other businesses and individuals, too. Borrowing may become easier once again, helping grow the economy.

The list below includes some of the most well-known names and nearly all of them are a BUY. Bank of America (BAC) and Citigroup (C) are the only two with a HOLD rating. But the C+ rating is at the top of the HOLD range, and if things keep going the way they are, both of those stocks could move up.

Overall, banks have a lot to look forward to in 2017. Promises made by the president-elect can have game-changing effects. But there is one threat to remain wary of: If business regulation becomes very loose, banks must be careful and smart in their lending practices, so we don’t see a repeat of the 2008 financial collapse.