Hedge funds ramped up purchases of US bank stocks at the fastest pace in nearly a decade last week, betting the sector’s historic rally still has room to run, according to a report by Bloomberg citing prime brokerage data from Goldman Sachs.
Buoyed by expectations for interest rate cuts, looser capital rules, and a clean sweep in the Federal Reserve’s annual stress tests, US financial stocks surged to all-time highs, with the S&P 500 financials index hitting a record and the KBW Bank Index now up over 30% since April.
Analysts from UBS, BofA, and RBC Capital Markets see further upside, citing potential regulatory rollbacks and improved lending profitability. Hedge fund flows into large-cap banks are echoing those bullish views, with option traders also heavily skewed toward calls on financial ETFs.
Key players like JPMorgan, Citi, and Wells Fargo report earnings on 15 July, which could mark the next catalyst in the sector’s surge. Despite muted Q2 earnings growth forecasts, hedge funds are clearly positioning for a continued rebound.
