This Week in Finance: Wells Fargo, Bank of America, JPMorgan, and More

Although the outcome was unexpected, investors in many big financial stocks had a week to remember due to America electing Donald Trump as the next President of the United States. In this article, we recap the meaningful events that occurred to Wells Fargo & Co (NYSE:WFC), Bank of America Corp (NYSE:BAC), E*TRADE Financial Corp (NASDAQ:ETFC), JPMorgan Chase & Co. (NYSE:JPM), and Goldman Sachs Group Inc (NYSE:GS) this week and check how the smart money were positioned among the five stocks.

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Bank of America Corp (NYSE:BAC), JPMorgan Chase & Co. (NYSE:JPM), and Wells Fargo & Co (NYSE:WFC) all handily beat the S&P 500 this week thanks to the U.S. election outcome on November 8. Due to the perception that President-Elect Donald Trump will roll back the regulations on community banking and ‘dismantle’ Frank-Dodd, Bank of America rallied 14.9% and JPMorgan surged 13.1% to both hit 52 week highs. Even perennial laggard Wells Fargo rallied 15.99% for the week, or over quadruple the S&P 500’s advance of 3.79%. Some traders likely bought Wells after the Oracle of Omaha, Warren Buffett, said on Friday that he hasn’t sold a single share of the bank after its ‘terrible mistake’ of tolerating shady sales practices in the past. Buffett thinks Wells Fargo is a great institution and he believes the bank has the right man to right the ship with CEO Tim Sloan.

Although Trump isn’t exactly a fan of big banks given that his website released the following as justification for the repeal of Frank-Dodd:

big banks got bigger while community financial institutions have disappeared at a rate of one per day, and taxpayers remain on the hook for bailing out financial firms deemed ‘too big to fail… The Financial Services Policy Implementation team will be working to dismantle the Dodd-Frank Act and replace it with new policies to encourage economic growth and job creation

Many traders think that Trump’s replacement policies will nevertheless help boost return on capital at the major banks.

According to our database of 749 top funds, 102 were long Bank of America Corp (NYSE:BAC), 99 had bullish positions in JPMorgan Chase & Co. (NYSE:JPM), and 88 owned Wells Fargo & Co (NYSE:WFC) at the end of June.

On the next page, we recap the events that occurred to E*TRADE Financial Corp and Goldman Sachs Group Inc.

Also on the back of the Trump win, E*TRADE Financial Corp (NASDAQ:ETFC) popped 17.44% while Goldman Sachs Group Inc (NYSE:GS) rallied 15.9% this week. Traders bought E*TRADE hand over fist due to the anticipation that interest rates will rise faster than previously expected. Although the Federal Reserve is independent from the Presidency, Trump’s future use of fiscal policy levers to stimulate the economy (such as cutting taxes, increasing infrastructure spending, and trimming regulations) could increase inflation expectations, and thereby prompt the Fed to increase the Federal Funds rate faster as a precautionary measure. Trump could also eventually replace Chairwoman Janet Yellen once her term is up. E*Trade makes more money when interest rates are higher, all else equal.

Traders bought Goldman Sachs due to anticipation that capital markets activity will be more robust under a Trump Presidency. With less regulation, there could be more M&A. With lower corporate taxes, there could be more buybacks. With more opportunity on the Street, it’s not hard to see the smartest guys in the room benefiting. According to our records, 35 elite funds were long E*TRADE Financial Corp (NASDAQ:ETFC) at the end of June, down 4 funds from the previous quarter. Meanwhile, the number of elite funds with holdings in Goldman Sachs Group Inc (NYSE:GS) fell by 1 quarter-over-quarter to 68 at the end of June.

Disclosure:None