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Regional bank stocks are breaking out, and they may be able to continue to climb even if second-quarter earnings results are modest. The SPDR S & P Regional Bank ETF (KRE) has risen for six straight trading sessions, and on Monday it closed at its highest level since December. The regional bank ETF's 12.

5% rally in July has coincided with declining bond yields and increased confidence among traders that the Federal Reserve will start cutting interest rates in September. KRE 1Y mountain This regional bank ETF is at its highest level since December. Any rate cuts later this year won't be reflected in second-quarter results, nor will the lower bond yields that followed last week's surprisingly cool inflation report.



But markets are forward-looking, and investors could draw inspiration from the fact that bank stocks outperformed after rates peaked in 1995, the last time the Fed pulled off a "soft landing" in the economy. "Banks stocks rose 54% in 1995 (+34% S & P) on the back of a Fed pause following 250bp in rate hikes," Bank of America analyst Ebrahim Poonawala said in a July 11 note. "While we recognize that no two periods are the same, the combination of discounted valuations and investor comfort around EPS outlooks coming out of 2Q24 prints could set the stage for a sustained bounce into U.

S. elections," he added. Regional banks have struggled during the post-pandemic rate-hiking cycle, as the rapid rise in rates hurt their core business of borrowing short-term in the form o.

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