Market Turmoil Makes Big Bank Stocks a Buy

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The multiday market wipeout created any number of names to buy on valuation alone, and you can put some of the largest bank stocks on that list.bank stocks cheap stocks

From Bank of America (BAC) to Citigroup (C) to JPMorgan Chase (JMP) to Wells Fargo (WFC), the Big Four money-center bank stocks have been indiscriminately punished. That alone assures they’ll bounce back once the market normalizes.

More to the point — of course the Big Four bank stocks were sucked down in a market-wide selloff. But if the crash really was triggered by worries over the Chinese economy, what does that have to do with BAC, C, JPM and WFC?

Sluggish global growth isn’t good for any company. A sick China and other emerging markets will only make the global economy’s problems worse. However, the future trajectory of JPM, WFC, BAC and C will be determined by the domestic economy, which is actually OK.

Here’s a quick list of some positives that JPM, WFC, BAC and C share:

  • The labor market is in much better shape. There are even signs of a pickup in wage growth.
  • The housing market looks to be back for real now.
  • Consumers have shed debt, while low gas prices give them more discretionary dollars.
  • Outside of the energy sector, corporate profit growth continues apace.
  • Rampant dealmaking is goosing results in investment banking segments.
  • A potential rate hike could eventually lead to a rise in net interest margins.
  • Massive recent litigation costs are a thing of the past.

Bullish on Bank Stocks

Heck, even the most troubled of the Big Four are off the schnide. Citigroup and Bank of America both reported encouraging quarterly results. Their turnarounds are decidedly turning, and it’s only a matter of time before improved sentiment leads to some multiple expansion for C and BAC stock.

And yet, each one of these bank stocks has lost about 10% at some point in the last five days. JPM stock lost more than 20% at one point in Monday trading. And yet nothing — nothing — has changed in the outlook for the U.S. economy.

Indeed, the news flow has been unquestionably good. July orders for durable goods were unexpectedly strong, indicating a willingness by businesses to invest despite global uncertainty. Homebuilder sentiment hit a 10-year high in August, while U.S. housing starts are close to an eight-year high. Meanwhile, existing-home sales are running at their fastest pace since February 2007.

The steep drops seen in the big money-center bank stocks are divorced from reality. The fundamentals remain strong.

If you’re looking to initiate or add to a position in JPM, BAC, WFC or C, this period of market madness offers a fine opportunity.

As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.

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Article printed from InvestorPlace Media, https://investorplace.com/2015/08/bank-stocks-jpm-c-bac-wfc/.

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