The stock market has been stuck in neutral for the past two months and investors are growing increasingly worried about an economic slowdown. This is reflected in the recent weakness in tech stocks and the sell-off that followed NVDA's impressive but potentially slowing earnings report. But don't panic. The Fed is about to come to the rescue with a series of rate cuts, and that spells opportunity for those in the know.
As Luke Lango of InvestorPlace points out, the Fed's rate cuts will unfreeze the lending markets, giving a boost to a number of sectors that have been hit hard by high interest rates. This includes housing, autos, and construction. Luke expects a domino effect, with the first rate cut triggering a wave of buying as investors anticipate a series of cuts and a strengthening economy. He also sees a strong parallel between the current setup and the events of 1998, when a similar dynamic led to a 50% surge in the stock market.
Read Luke's Full Analysis Here
One sector in particular that's set to benefit from the Fed's “pivot” is banking. Lower rates mean banks can borrow money more cheaply, and lend it out at higher rates, widening their profit margins. And that's why we've put together this watch list of three bank stocks that look poised for big gains in the months ahead.
3 Bank Stocks to Buy Before The Rate Cuts
Bank of America (BAC)
Love him or hate him, when Warren Buffett makes a move, people pay attention. And right now he's been selling off a big chunk of his stake in Bank of America. Does this mean it's time to dump BAC? Not so fast.
According to Shah Gilani of Total Wealth Research, “It’s not all about one stock. It’s about the market,” explaining that a single stock’s trend does not reflect or indicate the overall direction of the broader markets.
Buffett's decision to sell BAC shouldn't be viewed as a death knell for the stock. It's more likely that he's simply taking profits after a 50% gain since late 2023. After all, his bread and butter is value investing, which means he looks for undervalued assets with the potential for long-term growth. And BAC–while a solid company–probably doesn't fit that bill right now.
That doesn't mean it's not a good buy for the rest of us.
As of September 6th BAC stock is rated a Strong Buy by Money Morning, with their analysis suggesting it is well-positioned to capitalize on lower interest rates.
Check out Money Morning's Full Analysis
Remember, we're looking for short-term gains based on the Fed's actions and the market's reaction. And BAC is poised to benefit from both.
JPMorgan Chase (JPM)
JPMorgan Chase is another banking behemoth that's likely to get a lift from the Fed's upcoming rate cuts. Andrew McGuirk of Stansberry Research suggests that while there are growing concerns about a recession, the economy is still strong and showing signs of resilience.
Read Andrew's Full Analysis Here
He points to several factors that suggest the U.S. economy can avoid a recession—or weather it fairly easily—including a resilient labor market, strong consumer spending, and the fact that the Fed is poised to intervene with rate cuts.
And as the largest bank in the United States, JPMorgan Chase is perfectly positioned to benefit from a healthy economy, and will be one of the first banks to take advantage of lower interest rates.
PNC Financial Services (PNC)
PNC Financial Services is another high-quality bank stock that's set to benefit from the Fed's pivot. Like JPMorgan Chase, PNC is well-capitalized and has a strong track record of profitability. And as Andrew McGuirk notes, PNC is one of the few banks that's been hitting new highs in recent weeks, a signal of its strength and investors' confidence in its future prospects.
As the markets shift, look for PNC to use its size and scope to leverage the benefits of lower interest rates while remaining strong in its core business.
What You Should Do Now
While the market is experiencing volatility, savvy investors are looking beyond the fear-mongering and positioning for the coming market rebound. The Fed's rate cuts will be a major catalyst, providing a much-needed boost for the economy and especially the banking sector.
These three bank stocks — BAC, JPM, and PNC — are our top picks to play this trend. All three are high-quality companies with strong fundamentals and a history of profitability. As the market digests the Fed's actions these stocks look poised for solid growth in the months ahead.
Keep your eyes on your inbox–tomorrow I'll be sharing 3 stocks that you should buy while everyone else is panicking about the Jobs Report.
