26-06-2025
JPMorgan record may help confirm bull market
JPMorgan Chase shares hit an all-time high Wednesday, leading a financial sector that looks primed for a tech-like rally.
Why it matters: Strategists say a breakout in the financial sector, combined with records across other market segments, would confirm the bull market is back and tariff concerns are dead.
By the numbers: On a technical basis, the XLF ETF, tracking the financial sector in the S&P 500, is poised for a breakout after a V-shaped recovery.
The sector is up nearly 17% since the April lows, led in part by a 35% rally in JPMorgan shares over the same time period.
Between the lines: There are three drivers for the momentum, according to Jay Woods, a chartered market technician and the chief global strategist at Freedom Capital Markets.
The Federal Reserve may be on track to ease interest rates sooner than investors have anticipated, which would lower capital costs for banks.
Regulatory pressure is set to ease, and Woods notes a possible deal between Bank of New York Mellon and Northern Trust would be "extremely bullish" for the sector.
Technical indicators show financials set for a similar recovery to the one just seen in the tech sector. The more sector breakouts we see, the better for the market as a whole.
Reality check: If the Federal Reserve keeps rates higher for longer, that's a headwind to banks, which will have to stomach the higher cost of capital.
Still, an upcoming "light regulatory touch" could outweigh delays on rate cuts, according to Marci McGregor, head of portfolio strategy for the chief investment office at Merrill and Bank of America Private Bank, who has financials as one of her most favored sectors.
On Wednesday, a trio of financial regulators proposed relaxing how much capital banks must hold against their investments, a long-sought win for the industry.
The intrigue: While regulatory easing is as a catalyst for American banks, some Wall Street pros remain more bullish on European bank stocks given the stimulative policy backdrop in the Eurozone.
Jay Pelosky, founder of TPW Advisory, says European banks are "the play on the new Europe" that people haven't caught onto just yet.
Pelosky sees an upcoming buildout of a more robust European financial system, with European bank stocks up nearly 30% this year.
