A good day for the stock market is proving to be a great day for select financial names. Shares of brokerage outfits Charles Schwab(NYSE: SCHW) and Raymond James Financial(NYSE: RJF) are up 6.5% and 9.4% (respectively) headed into Wednesday's close, for reasons that aren't exactly surprising.
Brewing up a bullish environment for the banking business
Credit Donald Trump's successful bid for the U.S. presidency, mostly. While current VP and defeated presidential hopeful Kamala Harris wouldn't have necessarily been bad for business, it's believed that brokerage firms and other financial stocks will fare better with pro-business Trump in the White House. Shares of more conventional banking names like Wells Fargo(NYSE: WFC) and Bank of America (NYSE: BAC) are faring even better on Wednesday, for largely the same reason.
And it's not a terrible bet. Shares of Raymond James advanced between the time Trump was first elected in November 2016 and the advent of the COVID-19 pandemic in early 2020. Ditto for Charles Schwab stock.
Both companies also saw accelerated revenue growth during that time, fueled by unexpectedly strong economic growth; at its Q3-2019 peak under his leadership, the nation's GDP growth rate reached a sold 4.8%. The United States' GDP growth largely held above long-term norms, however, for the better part of his presidency, lifting most facets of the domestic economy. This ultimately benefits brokerage firms, which help companies raise growth capital, as well as facilitate investments in this potential growth.
Given that his current agenda looks like a refreshed version of Trump's economic agenda then, the dots investors are connecting today make sense.
If you must invest, one's a better bet than the other
One should always be careful with such emotionally charged, knee-jerk responses. Although well reasoned, they don't always last, let alone mark the beginning of new trends.
That could easily prove to be the case with Raymond James shares, which were already trading at record highs prior to Wednesday's bullish jolt. Today's jump only leaves them more vulnerable to profit-taking. Making them even more vulnerable is the fact that shares are now trading well above analysts' consensus price target of around $146.
If you're afraid you may end up missing out on a post-Trump-election gain, however, there's a decent case to be made for stepping into Charles Schwab stock despite today's jump. Even with Wednesday's big gain, at around $75 apiece, shares are still well below their early-2022 high, leaving room for further upside.
Schwab's also arguably the better pick just by sheer virtue of its size and notoriety.
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Wells Fargo is an advertising partner of Motley Fool Money. Charles Schwab is an advertising partner of Motley Fool Money. Bank of America is an advertising partner of Motley Fool Money. James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bank of America. The Motley Fool recommends Charles Schwab and recommends the following options: short December 2024 $67.50 calls on Charles Schwab. The Motley Fool has a disclosure policy.
