Finance

Trump may boost for big banks due to deregulation, small caps

Published

2 weeks ago

February 8, 2025

What big banks and small caps have in common right now

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

Disclaimer

Finance

Steve Cohen says tariffs and DOGE’s cuts are negative for economy, market correction could be soon

Published

2 hours ago

February 21, 2025

Business Finance News

Steve Cohen, chairman and CEO of Point72, speaking to CNBC on April 3, 2024.

CNBC

Billionaire investor Steve Cohen doubled down on his negative view of the U.S. economy due to a backdrop of punitive tariffs, immigration crackdown and federal spending cuts spearheaded by the Department of Government Efficiency.

The chairman and CEO of hedge fund Point72 said he turned bearish for the first time in a while after President Donald Trump’s aggressive trade policy made him worry about inflationary pressures and lower consumer spending. Meanwhile, his tough stance on immigration could mean a constrained supply of labor, he said.

“Tariffs cannot be positive, okay? I mean, it’s a tax,” Cohen said Friday at the FII Priority Summit in Miami Beach, Fla. “On top of that, we have slowing immigration, which means the labor force will not grow as rapidly as … the last five years and so.”

The prominent hedge fund investor took a stab at DOGE’s cost-cutting moves led by Elon Musk, saying they could only hurt the economy more. Musk has said his goal is to cut federal spending by $2 trillion.

“When that money has been coursing through the economy over many years, and now, potentially it will be reduced or stopped in many ways, has got to be negative for the economy,” Cohen said.

Cohen believes a pullback in the stock market could be likely given the uncertain macroeconomic environment. He sees the U.S. economy growth to slow down to 1.5% from 2.5% in the second half of the year.

“I think we’re seeing the regime shift a little bit. It may only last a year or so, but it’s definitely a period where I think the best gains have been had and wouldn’t surprise me to see a significant correction,” Cohen said. “I don’t think it’s going to be a disaster.”