NEW YORK ( TheStreet) -- With earnings season underway, many investors will be watching the financial sector for clues on the economy.
Stephanie Link, the co-portfolio manager of Action Alerts Plus, told TheStreet's Lindsey Bell that while Alcoa (AA) kicked off earnings on Monday afternoon, Wells Fargo (WFC - Get Report) and JPMorgan (JPM - Get Report) will really be the earnings to watch when they report Friday morning.
Investors will be waiting to hear what the firms expect from the economy in the second half of 2013, Link said. While investor optimism appears high, Link thinks it will be a "sell-the-news" type of event, citing limited top-line growth.
The banks will also continue doing well with cutting costs and releasing some of its reserves, but loan growth will likely remain stagnant, she added.However, while there is limited potential right now, more positive catalysts should begin to propel the bank stocks higher going into 2014, including higher net interest margins, an improving housing market and a growing economy -- albeit, slowly. But will the new capital requirements be a negative for the banks going forward? "Not at all," according to Link. With the 2018 deadline, the banks should be able to exceed these amounts well before then. However, investors will continue to worry about the banks being allowed to payout dividends and buy back outstanding shares. Aside from JPM and WFC, both of which are holdings in the Action Alerts Plus portfolio, Link likes regional banks M&T Bank (MTB) and Hudson City Bancorp (HCBK) for their potential going into the next year. -- Written by Bret Kenwell in Petoskey, Mich. Follow @BretKenwell
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