What to expect before the season kicks off



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There is only one sleep left until the start of the second quarter earnings season, and the big banks are the flagship event.

Goldman Sachs, JPMorgan, Citigroup and Bank of America will lead the charge with their reports over the next few days.

Ari Wald, head of technical analysis at Oppenheimer, said investors should be picky about banks. The company advises a market weighting on the group given the “limited” interest rate expectations.

“For industry exposure, we differentiate them by those who were able to climb back above their pre-Covid peaks. These are the ones that show relative strength in our work. For example, we recommend JPMorgan to Wells Fargo as an industry neutral pair, “Wald told CNBC’s” Trading Nation “Monday.

“You really see it in the relative ratio. JPMorgan has been underperforming since last November. The market has rewarded the beta of Wells Fargo. I think JP now offers some potential for rotation, a little bit stronger position that is coming back. in the foreground, “Wald mentioned.

JPMorgan grew 24% in 2021, better than the rest of the market but below some of its peers. Wells Fargo, by comparison, grew 46%.

While some banks may be better positioned, the entire group should benefit from a strong earnings season, according to Michael Bapis, chief executive of Vios Advisors at Rockefeller Capital.

“A lot of key components and fundamentals line up in favor of the bank,” Bapis said in the same interview. “On the top six banks, deposits have increased by about 30% since the start of 2020, you see dividend yields increasing by about 40% on the banks, and they are very well capitalized.”

The KBE bank ETF returns 2.24%, higher than the return of 1.34% of the S&P 500.

“They passed all the stress tests, their most recent stress tests, and they are trading between 11 and 15 times earnings, which is historically low for bank stocks,” he said. “I believe you own them and keep them for the long term and I would almost overweight banks right now in financials.”

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