The most exciting trade right now might be its most boring. As AI high-flyers wobble, the KBW Bank Index’s 18% surge has widened its lead over the S&P 500 this year — on pace for a third straight year of outperformance. Financials are the S&P 500’s second-best-performing sector over the past three months, trailing only healthcare.
- Wells Fargo analyst Mike Mayo credits banks for cashing in on AI capex financing — calling them “among the greatest beneficiaries of the tech and AI revolution.”
- Fundstrat also points to the steepening Treasury curve — increasing bank margins by raising the interest on long-term loans faster than the interest paid to depositors.
Beyond the balance sheet: The bullishness doesn't stop at bank lobbies. Goldman Sachs and Morgan Stanley each pocketed $100M from the SpaceX IPO, Wall Street's best haul since 2021. While investors also added $3.4B to the State Street Financial Select ETF in July, the rally isn't cheap anymore. KBW now trades at 2.4x tangible book, its highest since early 2008 — just as UBS warns a slowdown could hurt the group. Boring never used to cost this much.