Over the past month, financial stocks have gone on a considerable run. This is driven by a combination of factors – but predominantly optimism that President Trump’s tax reform proposal, aimed at boosting American economic growth, will be passed. Among the biggest gainers has been JP Morgan Chase & Chase Co. (NASDAQ:$JPM)
Before the opening bell tomorrow, JPM will report its fiscal 3Q17 earnings. The bank has seen more than 8% returns in thirty days, equating to 64% of the bank’s 12.5% year to date returns. The stock has also been buoyed by the Republican party’s ambitious goal to slash taxes.
The question now is, is it the time to reap in profits, especially with the shares now trading at a 52-week high? Or, is it better to wait out on the Trump administration to fulfill its promise of regulation and tax cuts? As such, even if the original plan of cutting the corporate rate from 35% to 25% is not reached, the market seems optimistic even if a compromise figure will be reached.
JPM’s head of U.S. equity strategy, Dubravko Lakos-Bujas spoke: “Even the modest corporate tax reform could send stocks soaring higher, potentially adding 150 points or more to the S&P 500.”
Further, Trump’s corporate tax plan is not the only reason that’s given bank stocks their bullish run. The Fed signaled in its last monetary policy meeting that another rate hike was on the horizon at its next meeting in December. That, in addition to winding down the government balance sheet, suggests that banks could be in play for the next several quarters as industry metrics are set to be optimized in their favor.
JPM also recently hiked its dividends by 12%, from 50 cents to 56 cents quarterly per share. For the three months that ended September, analysts are expecting the bank to earn $1.66 per share on revenue of $25.24 billion. As a comparison, the year-ago quarter numbers were $1.58 per share on $25.51 billion in revenue.
All in all, even without Trump’s proposed tax breaks, JPM- fresh off its record of $7 billion in net income in Q2- is set to deliver solid 3Q earnings growth.
Featured Image: depositphotos/TKKurikawa
