A combination of the strong jobs reports in the U.S. and growing enthusiasm for the business reopening sent bank stocks higher. Wells Fargo (NYSE:WFC) recovering well-above the $30 level is technically notable.
The stock tried but failed since March to break about that price. In Canada, despite a hike in loan and credit card provisions, bank stocks also soared. What should investors do after the breakout?
Income investors may enjoy the paper gains and do nothing at this time. If bank stocks pull back, the dividend yield based on the price purchased will not change. To justify the recent uptrend, markets cannot afford to see COVID-19 infection rates increasing.
The protests in the U.S. and around the world are especially disturbing from a health and safety perspective. Anyone infected protester not wearing a mask or too close to others could spread the virus. This may slow the government’s efforts to re-open.
The long-term prospects for banks are looking brighter. If provisions do not rise, then investors will not need to worry about more losses in 2020.
Investors will have greater confidence that dividends will stay the same and not get cut. That, alone, supports the view that banks are stocks to hold for the long term.
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