JPMorgan Chase & Co.: Trump is Great News for JPM Stock
November 10, 2016
The last eight years have seen a single interest rate hike in the United States, and the future is still unknown regarding how gradually the rates will be increased. Interest rates are currently sitting at historic lows of 0.25% to 0.50%. When the U.S. Federal Reserve is not hiking rates, it means that there is no confidence in the economy.
Over this period, the top spot for overseeing the economy was held by Barack Obama. And with the presidential race to the White House, the tone from Hilary Clinton was to stay the course. However, there were many Americans who didn’t want to see more of the same from the economy, and Donald Trump was their answer.
One of Trump’s top priorities, according to the President-elect, is to grow the economy, and not just in the major cities that always see growth, such as New York City and Los Angeles, but the entire country. By doing so, sectors such as manufacturing and agriculture could help grow the economy in a way that hasn’t been seen in years.
With the economy growing, the U.S. Federal Reserve will take notice and be confident enough to raise interest rates. With rising interest rates and the U.S. economy growing, one beneficiary would be the financial sector, especially JPMorgan Chase & Co. (NYSE:JPM). The price movement of JPM stock the day after the election showed investors positioning their portfolios for a Trump presidency, with JPM stock shares up 5.48% and trading at a 52-week high of $73.84. (Source: “JPMorgan Chase & Co.,” MarketWatch, last accessed November 9, 2016.)
With the entire U.S. economy growing, it would mean that financial-sector products are needed, including bank accounts, lines of credit, and investment advice for retirement. With JPMorgan being the largest megabank in the U.S., it will be the first bank that comes to mind for customers needing banking services.
Higher demand for JPMorgan Chase & Co.’s services will be reflected in the bottom line of the balance sheet. However, the economy won’t turn overnight; it will take some time. For patient dividend investors, a yield of 2.6% would be earned, with JPM stock paying $0.48 per quarter. Looking over the past eight years that Obama was in office, the dividend has increased just 26%. With Trump taking over the White House and the economy as a focus, there is a high probability that larger dividend hikes are on the way.
Final Word on JPM Stock
With the U.S. election in the history books, we know that Trump will reside in the White House for the next four years. With Trump focused on the economy JPM stock is one that shouldn’t be ignored. Solely based on a valuation, the shares are trading at a P/E ratio of 12.76, which is cheaper than the S&P 500, which has a P/E ratio of 24.88.
