Why Wall Street says bank stocks are a top play for 2025

Buy bank stocks!

That’s the overwhelming consensus among strategists heading into 2025. Notable names including Bank of America’s Savita Subramanian, BMO’s Brian Belski, and Wells Fargo’s Chris Harvey are among the bulls for financial stocks.

The catalysts are clear: a strong economy, expectations of deregulation under President-elect Donald Trump, attractive valuations, and lower interest rates.

Harvey recently emphasized the sector’s attractive pricing in a note to clients, writing that money managers “finally need to pay attention to the space,” while Belski wrote in his 2025 outlook that financials remain “drastically unloved” despite strong earnings growth expectations and compelling valuations.

The market is already starting to reflect that optimism. The financials sector fund (XLF) has soared following President-elect Donald Trump’s victory last month. It’s among the top-performing sectors, climbing nearly 7% since Nov. 5 — outperforming the broader S&P 500 benchmark.

“There’s about $7 trillion sitting in cash money market funds that’s starting to make its way into the market. It’s starting in fixed income and it may extend into equities,” Alex Blostein, senior analyst for Goldman Sachs’s Global Investment Research, told me on Yahoo Finance’s Catalyst earlier this week. “All of these things seem to be really bullish for financials into 2025.”

The upbeat sentiment isn’t limited to strategists and analysts — we’re hearing it from big bank leaders too. Bank of America (BAC) CEO Brian Moynihan told Yahoo Finance’s Brian Sozzi at last month’s Invest conference that he’s confident in the US economy under Trump’s leadership and expects the administration to “hit the ground running.”

Executives from JPMorgan (JPM) and Goldman Sachs (GS) expressed similar optimism at Goldman Sachs’ Financial Services conference this past week. Goldman Sachs CFO Denis Coleman said he’s seeing “elevated levels of optimism” heading into 2025, while JPMorgan’s Consumer & Community Banking CEO Marianne Lake projected a surge in investment banking fees.

“The intensity of our client dialogues is accelerating. … There is certainly elevated confidence with CEOs and clients that there could be more by way of larger-scale transactions, more strategic activity that could take place,” Coleman said at the event.

The gradual recovery in the IPO market is viewed as another tailwind. While activity remains well below peak 2021 levels, the pace of public debuts is picking up. Since the start of the year, 158 companies have gone public in the US via a traditional IPO — a 35% jump compared to 2023, according to Dealogic data.

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It’s a trend that’s expected to pick up pace next year, as a better economy and lower-rate environment are expected to lure companies off the sidelines. This week’s strong public debut for software company ServiceTitan (TTAN), whose shares soared over 40% in its first day of trade, adds to the bullish sentiment.

“There’s legs to financials,” Wall Street Alliance Group’s Aadil Zaman told me on Morning Brief. “Fed terminal rate will drop, and banks will benefit from greater investment banking activity.”

Jake Manoukian, US Head of Investment Strategy for JPMorgan Private Bank, told me his team is looking toward the financials sector and asset management industry for their 2025 portfolio.

“There’s a clear sense that this will be a friendlier administration to Wall Street and to dealmaking activity,” Manoukian said.

There’s precedence for the sky-high enthusiasm. Financials have long been viewed as a top trade under Republican administrations due to expectations for looser regulation — creating a more favorable environment for banks and dealmaking.

Seana Smith is an anchor at Yahoo Finance. Follow Smith on Twitter @SeanaNSmith. Tips on deals, mergers, activist situations, or anything else? Email [email protected].

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