Top 3 Financial Stocks Set to Gain From Looser Regulations

Key Points

• After a solid year in 2024, financial stocks are likely to have an even better year in 2025 after Donald Trump's election.
• Less regulation and more M&A activity will be two driving forces behind this growth.
• JPMorgan Chase, Wells Fargo, and Goldman Sachs look to be three of the biggest winners in the sector.  

After several years of lackluster performance, financial stocks are one of the best-performing sectors in 2024. A key reason for this is the Federal Reserve’s pivot to lower interest rates. In addition to reducing the cost of borrowing, lower rates have increased the value of some banks' investment portfolios.  

And they could be headed to an even better year in 2025. The banking sector, like the nation’s monetary policy, tends to be likened to turning a battleship. However, Donald Trump campaigned on a platform of sweeping changes that, if enacted, would be bullish for finance stocks.  

One of Trump’s central campaign promises was to loosen regulations on American companies. That will likely include loosening the stringent regulations that banks have been dealing with since the financial crisis of 2008 and 2009. One example is likely to be a pause on instituting the new banking requirements, known as the Basel III Endgame, which were expected to take effect sometime in 2025.  

Of course, every new administration brings with it a list of unknowns, and the Trump administration is no different. Banks will be watching carefully to get clarity on issues like tariffs and what that would mean for the balance of trade. It’s also possible that the Federal Reserve may slow down its pace of rate cuts. 

But those are issues for another day. For now, investors are looking at what financial stocks they should be eyeing for solid returns in 2025. Here are three companies that look like certain winners.  

JPMorgan Chase Is About Buying the Best 

JPMorgan Chase & Co. NYSE: JPM seems like an obvious winner among finance stocks in the Trump administration. The day after the U.S. presidential election, shares of JPM stock shot 11% higher, nearly double that of the Financial Select Sector SPDR ETF NYSE: XLF. But this isn’t just a recent phenomenon. The banking giant has been one of the best stocks to own over the last five years. The total return on JPM stock is 116.76% at that time. 

JPM stock was up nearly 35% in 2024 before the election. The stock hit a new all-time high in January and hasn’t looked back. Since the company’s earnings report in August, analysts have been raising their price targets, which means there may still be some solid upside for investors on the sidelines.  

Not only is it one of the most reliable bank stocks, but it’s also a blue-chip dividend stock. In the case of JPMorgan, the dividend has a 2.05% yield and has increased for 14 consecutive years. 

Wells Fargo May be Able to Shed Its Asset Cap 

Prior to the presidential election, shares of Wells Fargo & Co. NYSE: WFC were essentially flat for five years. It's fair to say that the bank brought some of the trouble on itself due to the fake account scandal that engulfed it in controversy in 2016.  

Among the many penalties the bank has faced because of the scandal, the most severe in terms of earnings was the asset cap imposed on the bank in 2018 by the Federal Reserve. At that time, Wells Fargo was barred from having more than $1.95 trillion in assets (i.e., an asset cap).  

That has cost Wells Fargo revenue from loan origination and subsequent interest payments on those loans. The asset cap has, since it was imposed, cost the bank more than $10 million in earnings.  

The bank has submitted the necessary documents to lift the cap, and the matter now rests with the Fed. While progress slowed during the Biden administration, the Trump administration is expected to expedite the approval process. If the bank has thoroughly met all requirements, a favorable resolution is likely.

Goldman Sachs Is Ready to Deal 

The Biden administration has slowed the pace of mergers and acquisitions (M&A) and initial public offering (IPO) activity, which are key revenue drivers for Goldman Sachs Group Inc. NYSE: GS. After a record year for M&A activity in 2021, deal volume fell 42% in 2023, and while there have been a few notable deals in 2024, the sector could use a release from its shackles. 

That’s something a pro-business administration will provide. And, of course, lower taxes and less regulation will also be bullish for GS stock. The company’s stock shot up 12% after the election. However, analysts have been increasing their price targets for the company’s stock since it delivered strong earnings in October.