Bank Stocks Ready to Take Off on Rates and Soft Landing, Mayo Says
- Banks top S&P 500 by about 10% in quarter after first rate cut
- Wells Fargo analyst warns that outperformance may not last
This article is for subscribers only.
With the Federal Reserve preparing to reduce interest rates and the US economy showing few signs of a recession, banks stocks are set up for a strong rally, according to Wells Fargo & Co. analyst Mike Mayo.
Rate cuts should help net interest margins at many lenders, and indeed numerous large-cap banks are projecting higher net interest income and margins, partly based on lower deposit costs, the Wells Fargo analyst wrote in a note to clients Thursday. Banks have historically outperformed the S&P 500 by an estimated 10% from trough to peak during the quarter after a first interest rate cut, Mayo said.