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Five Reasons to Love Bank Stocks

NEW YORK ( TheStreet) -- I was practically all alone on March 18 when I gave you five reasons to steer clear of bank stocks , but it turns out heeding that advice would not have been such a bad idea.

The SPDR KBW Bank ETF (KBE), which counts Citigroup (C - Get Report), Bank of America (BAC - Get Report), Wells Fargo (WFC - Get Report) JPMorgan Chase (JPM - Get Report) and US Bancorp (USB - Get Report) as its top five holdings, was at $26.01 when I wrote my story.

While it would hit a high of $29.22 on April 21, it touched a recent low at $23.33 Tuesday. Two reasons I highlighted, "Regulatory Threats Resurface" and "European Contagion," look especially smart. So give me an A for insight and a C+ for timing.

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Now that everyone is freaking out about bank stocks, it may be worth taking another look at the sector, which for current purposes also includes Goldman Sachs (GS - Get Report) and Morgan Stanley (MS - Get Report). They have been a big part of the recent selloff, and they may have more in common with JPMorgan, Bank of America and Citigroup than any of those three does with Wells Fargo, or certainly US Bancorp.

There are plenty of reasons to be a bull on banks. Here are a few.

5. The U.S. Economy Is Improving

The recent selloff, not just in bank stocks but in global equities, has had nothing to do with any signals in the U.S. economy. It's been all about European countries like Greece, Spain, Ireland and Portugal struggling under heavy debt loads, with a pinch of fear about overzealous regulators thrown in. There may also just be a general fear that equities have come too far too fast and those things provided an excuse for selling.

Meanwhile, things in the U.S. continue to mend. Since hitting a high of 10.6% in January, the U.S. unemployment rate is down to 9.5%. The steep rise in the chart shown here demonstrates that we've already had a historic rise in layoffs and hiring freezes. Employers freaked out, now they are hiring again, and it's hard to think of any single thing that could be more bullish for bank stocks. Sometimes it pays to keep it simple.
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BAC $17.48 0.09%
C $53.92 -0.66%
GS $188.65 -0.29%
JPM $66.77 -0.16%
MS $33.50 -0.42%


Chart of I:DJI
DOW 17,814.59 +2.40 0.01%
S&P 500 2,089.14 +2.55 0.12%
NASDAQ 5,102.8080 +0.33 0.01%

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