Finance
Trump may boost for big banks due to deregulation, small caps
The Trump administration may create powerful tailwinds for two vastly different market groups: Big banks and small cap stocks.
In the case of financials, Astoria Portfolio Advisors’ John Davi predicts deregulation — along with a boost in IPO and mergers and acquisitions — to spark multi-year strength.
“The funny thing about the banks is that they were actually from an earnings standpoint fundamentally getting very attractive prior to the Trump administration,” the firm’s founder and CEO told CNBC’s “ETF Edge” on this week. “The large-cap money centers like Goldman [Sachs], JPMorgan, Bank of America, Morgan Stanley… That’s really the area you want to hone in on with this new administration.”
The money center banks are coming off a strong week. Shares of Goldman Sachs, JPMorgan Chase and Morgan Stanley hit record highs on Friday.
That historic gains are a major reason why Davi likes the Invesco KBW Bank ETF. Its top holdings include JPMorgan, Goldman Sachs and Morgan Stanley, according to FactSet.
The ETF is up almost 10% since Jan. 1 and more than 49% over the past 52 weeks.
Year-to-date chart of the KBWB ETF
While bank stocks rally, VettaFi’s Todd Rosenbluth expects small cap stocks to shine under Trump 2.0. He sees the group adapting quickly to reshoring and tariff threats.
“If we have a focus on the U.S. and making America even stronger, then small-cap companies stand to benefit from that because they have less multinational exposure,” the firm’s head of research said.
Rosenbluth suggests the T. Rowe Price Small-Mid Cap ETF and Neuberger Berman Small-Mid Cap ETF as ways investors can play the group.
He also likes the VictoryShares Small Cap Free Cash Flow ETF, which has solid exposure to biotech. Its top three holdings according to the fund’s website are Royalty Pharma, Oscar Health and Jazz Pharmaceuticals, and its mission statement is to target “quality small cap companies, trading at a discount with favorable growth prospects.” Its top three holdings.
VictoryShares Small Cap Free Cash Flow ETF,
According to Rosenbluth, the ETF “takes a focus on companies with high quality, strong free cash flow generation, but it has a growth filter to it,” said Rosenbluth, who added the filter sets a high bar for which small-cap stocks ultimately make the cut.
The VictoryShares Small Cap Free Cash ETF is up almost 10% over the past year while the Russell 2000, which tracks the group, is up about 17%.
By CNBC “ETF Edge” Staff
‘The Big Money Show’ co-hosts discuss buy now, pay later spending options and the impact it will now have on your credit score.
Small, everyday purchases like a meal from DoorDash are now able to be financed through eat now, pay later options — a practice that some experts deem “predatory.”
“You’ve got to have enough sense to not follow the urge to finance a taco, okay? You have got to be an adult,” career coach Ken Coleman told “The Big Money Show,” Wednesday.
“This is predatory, and it’s going to get a lot of people in deep trouble.”
RISKS OF BUY NOW, PAY LATER: ‘TICKET TO OVERSPENDING,’ EXPERT SAYS
DoorDash and Klarna are now partnering up to extend buy now, pay later options to consumers. (Reuters, Getty / Getty Images)
Financial wellness experts are continuously sounding the alarm to cash-strapped consumers, warning them of the devastating impact this financial strategy could have on their credit score as some lenders will begin reporting those loans to credit agencies.
Consumers may risk getting hit with late fees and interest rates, similar to credit cards.
“So your sandwich might show up on your FICO score, especially if you pay for it late,” FOX Business’ Jackie DeAngelis explained.
EXPERTS WARN HIDDEN RISKS OF BUY NOW, PAY LATER
Major players like Affirm, Afterpay, and Klarna have risen to prominence at a time when Americans continue to grapple with persisting inflation, high interest rates and student loan payments, which resumed in October 2023 after a pause due to the COVID-19 pandemic.
Ramsey Solutions personal finance expert and ‘The Ramsey Show’ co-host George Kamel discusses the ‘buy now, pay later’ craze and the trend that celebrates the financial benefits of being childless.
“The Big Money Show” co-host Taylor Riggs offered a different perspective, suggesting that company CEOs have a “duty” to attract as many customers as they want.
“Unfortunately for me, this always comes down to financial literacy — which I know is so much in your heart about training people to save now by later,” she told Coleman, who regularly offers financial advice to callers on “The Ramsey Show.”
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Coleman continued to come to the defense of financially “desperate” consumers, arguing that companies are targeting “immature” customers.
“I’m for American businesses being able to do whatever they want to do under the law. That’s fine. But let’s still call it what it is: it’s predatory, and they know who their customers are,” Coleman concluded, “And I’m telling you, they’re talking about weak-minded, immature, desperate people.”
FOX Business’ Daniella Genovese contributed to this report.
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