The S&P 500 has struggled this week.
After hitting a new all-time high on February 12, the index has trended lower, and is currently down a little over 2% over the last week.
But while the index as a whole has been trading lower, financials broke out to fresh record highs this week as investors bet that rising interest rates will boost bank stocks.
The XLF S&P 500 Financials Sector ETF is up just under 3% for the week, and nearly 12% so far this year – outpacing the S&P 500’s year-to-date gain of 3.5%.
Rising yields and higher economic growth expectations have helped to push the group higher. And bank stocks should also benefit from buybacks this year after the Fed hit pause on them last year.
Both stocks closed at new all-time highs on Thursday, and both are up by double digits so far this year.
Saporu argues that both should benefit from higher yields—which will boost profitability—and increased trading revenue.
“Those are firms that you probably want to have a second glance at,” Saporu said. “Although I’m not long them right now, I do think that is something to watch.”
Last week, Goldman Sachs officially launched Marcus Invest, a fully digital investment management service for portfolios as modest as $1,000. The product represents the firm’s broader shift to offering financial services for clients across the wealth spectrum.
Goldman said that beyond Marcus Invest, clients have indicated they want an automated investment manager, and the bank said it is planning to attract new client through digital marketing and other acquisition channels.
And Saporu says Goldman’s exploration into additional avenues of growth is a positive for the stock.
“Their online high-yield savings platform, they’re lending on there,” Saporu said. “They also just got into robs-advising with their platform so they’re looking for other ways for growth. I think that’s super important for people that are looking for possible growth from these firms because they’re… past the [pre]-pandemic levels.”
As for JPMorgan, the firm is ramping up its search for acquisition targets as competition intensifies from fintech firms and other new rivals.
JPMorgan CFO Jennifer Piepszak said on Thursday that the effort is being driven by “perhaps a greater sense of urgency.”
“There are businesses like asset management where scale matters even more than it did a year ago,” Piepszak said. “And then other businesses where the need to move quickly and to innovate quickly to keep up with competition is certainly accelerating.”
Piepszak’s sentiment echoed CEO Jamie Dimon, who said last year that the firm was aggressive looking at acquisitions across its business lines. And in December, Dimon told M&A banks to call him with interesting ideas for mergers and acquisitions.
Federated Hermes portfolio manager Steve Chiavarone is bullish on both stocks as a play on the cyclical value trade.
“We really like both of these, and the value cyclical economy is a high conviction call for us for the remainder of 2021,” Chiavarone said.
“In August of 2020, growth was completing its biggest ever run versus value, over 44% on a trailing 12-month basis,” Chiavarone added. “We’ve only made back about 15% of that [since then]. We think there’s a lot more room to grow.”