What happens to bank stocks during inflation and rising interest rates? First we will explore the relationship between inflation vs interest rates in a hopefully straightforward manner, then we will look at what happens to be banks in depth, from both consumer banks and investment banks, and finally I will share my two top stock market picks in the sector. For full disclosure, I have deployed over 6 figures in each of these stocks, so I am putting my money where my mouth is. Different banks and multinational institutions are impacted by inflationary pressures. I am a firm believer that bank stocks rank among the best investments you can make when there is high inflation. You may also be thinking about hedging inflation via TIPS, gold and other precious metals, or perhaps digital assets, but bank stocks remain my preferred instrument.

Goldman Sachs (GS) is one of my top picks in the sector despite having run up a whopping 80% in a 6-month period. This type of parabolic move tends to happen when stocks move from being uninvestable (think Twilio, Uber/Lyft) to investable, but I don’t believe it has played out fully yet. The stock trades at a stupid cheap 5x forward 2021 P/E based on an annualized Q1 2021 EPS, and could go even higher if rates climb above 2% as basically every equity Strat on the Street is calling for. The setup reminds be of Blackstone (BX) back in 2013 / 2014. Nobody wanted to pay a high multiple for the PE shop’s performance fees, until people started realizing that they always print money. As performance becomes becomes laughably predictable, investors should give the professionals a higher multiple to boot.

Wells Fargo (WFC) is another one of my favorites as, being a consumer bank, they are more leveraged to the reflationary / steepening environment we find ourselves in. There are so many catalysts here.. the asset cap, expense rationalization and tech investment, normalization of legal and professional expenses, and reinstating of the dividend just to name a few. I covered this name extensively in another video so be sure to check that out.

For those of you who are new to my channel, I’m a 27 year old who has made over $1 MILLION in the stock market through good old fashioned long term investing. No leverage, options, excessive crypto / Tesla / meme stock positions or BS. I’ve spent some time on Wall St. and the buyside and my goal is to share some personal finance and investing tips that have worked for me.

0:00 – Intro
0:59 – Inflation vs. Interest Rates
1:53 – How the Fed Tackles Inflation
3:17 – What’s Happening with Long Term Rates?
3:50 – How this all Impacts the Banks Overall
4:25 – How this Impacts the Consumer Banks vs. Investment Banks
6:45 – My 2 top Sector Picks

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