The headwinds and tailwinds for US bank stocks

US bank stocks have rallied hard since the US elections in November with the S&P bank index climbing 24% from election day.

This reflects numerous tailwinds for the industry including increasing interest rates, reduced regulatory burden, corporate tax reform and other fundamental benefits of an accelerating US economy. The euphoria the stocks exhibited on election day has been dimmed by the realities of the legislative process and a positive but shifting economic landscape. Increasing interest rates have historically been a headwind to US bank stock performance as the market becomes concerned about the impact of a slowing economy.  This cycle is different in that banks have been struggling with a histor...