2 Bank Stocks to Buy Before the Bear Market Is Over

All of the main indexes fell in the market in different regions this year Nasdaq Composite taking one of the biggest hits. It is still down nearly 30% year to date.

The market has made some attempts to rally in the past two months, but due to the high level of uncertainty in the economy, it is difficult to know when the bulls will finally return. Many Wall Street experts expect a bear market, or at least a correction, to be with us well into 2023 as the recession fades.

The researchers and Bank of America (BAC -0.64%) said that S&P 500 could drop to 3,240 by April, which would be an 18% drop from current levels, before returning to around 4,000 by the end of the year – which is essentially where it is now a.

So, with that in mind, one of the best places to invest right now is in stocks, because they are cheap, should be able to handle a downturn, and it will power comes out at every break. Here are two great options: Bank of America and JPMorgan Chase (JPM 0.29%).

2 big banks benefit from high interest rates

It may not look like it from their returns, but both Bank of America and JPMorgan Chase have outperformed most of this market trend. The main reason was high interest rates, which made interest income very high and offset losses from investment banking, property management, and trading services. Just look at the nearest quarter as an example.

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JPMorgan Chase, the largest bank in the US, generated $17.6 billion in interest income in the third quarter, up 34% year over year. It earned more than half of the company’s $33.5 billion last quarter.

It is a similar situation for Bank of America, the second largest bank in the country. Bank of America generated $13.8 billion in interest income last quarter, which is 24% more than it did in the third quarter of 2021. Also, it earned more than half of the $24.5 billion in total income for the quarter.

In both cases, the interest income is tied to the company’s overall annual income. With interest rates not going down anytime soon, these two banks are a strong bet to continue generating large amounts of cash.

There are two areas that investors should keep in mind, including the loan service. For both banks, lending activity remains strong, with loans increasing every year. More loans mean more interest. If there is a bankruptcy, it may affect loan growth, although in the two quarters of bankruptcy this year, loans are still growing. Another cover is the provisions made for credit losses, which arise when the economy expands and consumes food. Although credit quality is still very strong for both, it is something to check.

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Why these stocks are buying now

Not only are these two banks big banks, but they are also the most efficient, efficient and effective of the big banks, so they are the best to solve the economic problems that have the potential for reduced lending services, is worsening. Credit rating, or high provision for credit losses.

They have also achieved the best long-term returns of the big banks, as the chart shows. Over the past 10 years, JPMorgan Chase has produced an annualized return of 12.2%, while Bank of America has an annualized return of 12.1%.

C Chart

C data of YCharts

Additionally, both stocks are trading at a discount. JPMorgan Chase has a price-earnings ratio (P/E) of 10.5, while Bank of America has a forward P/E of 9.6. It is another reason why now is the right time to get these two assets leading to the bank.

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Interest rates will remain high for some time, even if inflation is declining, so it will continue to benefit from these products well into the next year. But in the end, the bank is cyclical, so when the economy and the market start to come out of this funk, the bank will be difficult to come out of the recession and from the growth period of the bank. abundance. And these are the two best options to lead the way.

JPMorgan Chase is a media partner of The Ascent, a Motley Fool company. Citigroup is the media partner of The Ascent, a Motley Fool company. Wells Fargo is a media partner of The Ascent, a Motley Fool company. Bank of America is a media partner of The Ascent, a Motley Fool company. Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool owns positions in and supports JPMorgan Chase and Pnc Financial Services Group. The Motley Fool has a prediction.

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