Bank Stocks Surge Despite Trump's Tariff Threat

Davos, Switzerland - Investors should prepare for potential Federal Reserve rate hikes in 2025 if the Trump administration imposes new tariffs on China and the European Union.

"Anything is possible," said BNY CEO Robin Vince. "You've got to be prepared."

Despite the tariff uncertainty and its potential economic impact, bank stocks have been on an upswing since the election. The KBW Nasdaq Bank Index (^BKX) is up 8% since Trump's victory, and BNY shares have gained 3%.

Several factors are contributing to the bullishness, including expectations of reduced regulation under Trump and increased deal activity. The Basel III endgame may also benefit banks, freeing up capital for higher dividends and stock buybacks.

"The regulatory environment for large-cap banks is likely to stabilize," said Morgan Stanley analyst Betsy Graseck.

Top picks for financials include Citi (C), Barclays (BCS), and Robinhood (HOOD).

In the fourth quarter, major banks such as Goldman Sachs (GS), JP Morgan (JPM), and Citi (C) reported strong sales in investment banking and trading. BNY also performed well, driven by positive operating leverage and a diversified revenue mix.

Additional Key Points:

* The Federal Reserve's path remains uncertain, but a pause in rate hikes is possible.
* Trump's tariff threats continue to stoke concerns about a trade war.
* Reduced regulation and increased M&A activity are expected to benefit banks.
* Basel III endgame may lead to increased capital deployment.
* Bank of New York Mellon is overweight relative to trust bank peers due to its positive outlook and diversified revenue mix.