The financial markets are full of clues and queues for investors to consider when they are looking for the next path forward in their portfolios. Though some of these factors aren’t as clear-cut as watching a price chart move around certain technical levels, they’re a bit more intricate and deeply rooted in the market’s fabric. Such indicators can come from signals from different asset classes, such as bonds.
Today, the bond market is sending one such signal through the “Yield Curve”, which is finance talk for tracking the difference in yields between the ten-year treasury bond and the two-year treasury bond. The premise of this indicator is that when it steepens (the ten-year yield is now much higher than the two-year yield), those companies exposed to the long end of the curve will likely start to benefit from higher earnings via these yields.
While the thinking can go much further, and lead investors into several companies using this thinking, it is typically the financial sector that experiences this change first, as most banking stocks see their earnings per share (EPS) driven by interest income. For this reason, watching stocks like Wells Fargo & Co. (NYSE: WFC), Bank of America Co. (NYSE: BAC), and even JPMorgan Chase & Co. (NYSE: JPM) can turn out to be a profitable endeavor for portfolios.
Momentum Favors These Banking Stocks
All of these names now sit between 92% and 94% of their 52-week high prices, which can be taken as a sign of favorable momentum going into the belief of further outperformance due to this fundamental shift in yields. More than that, all stocks in this list have outperformed the broader S&P 500 index over the past month, reiterating this optimistic view.
Now, investors might be wondering why they should consider these stocks out of all the banking stocks in the market. The reason is that these names operate in commercial banking, where their main source of fees and interest income comes from offering credit products like mortgages and car loans.
Given that all of these loans are of longer duration in nature, this is where investors can connect the dots between a steepening yield curve (more favorable for longer-term yields) and the potential for better EPS down the line in these stocks in the coming months and quarters.
However solid this view may seem, it is only rooted in theory right now, and investors must be asking whether it is priced in through today’s prices or a higher ceiling could be had for these names. There’s an answer to that, too.
More Upside Potential? Starting With JPM Stock
[content-module:CompanyOverview|NYSE: JPM]As of mid-April 2024, Erika Najarian from the UBS Group decided to reiterate her Buy rating on the bank’s stock, only this time calling for a valuation target that better reflected this future.
Today’s valuation of $305 per share calls for a much higher ceiling than her previous view of $277 per share, though it is still not the boldest call out there.
Analyst Jason Goldberg from Barclays still sees a $330 per share valuation for JPMorgan Chase, a stance that hasn’t changed since the rating placement back in January 2025.
Either way, these views do call for anything between 5.3% and 25.5% upside from where the stock trades today.
Which side to listen to? Investors could have a good reason to see Goldberg’s higher target become a reality due to what’s happening underneath the financial hood of JPMorgan Chase’s business. Over the past quarter, the bank reported up to $5.07 in EPS compared to the $4.63 analyst expectations, a 9.5% beat to demonstrate this macro theme at play.
New Buyers Can’t Be Blamed for This Move
[content-module:CompanyOverview|NYSE: BAC]As of early May 2025, institutional buyers from Deutsche Bank decided to boost their holdings in Bank of America stock by as much as 45.1% as this steepening yield curve view takes on water, a shift that netted their position to a high of $2 billion today.
Like for JPMorgan Chase, other analysts see the potential in Bank of America, as it is one of the biggest mortgage originators in the United States.
Chris Kotowski from Oppenheimer has kept his Outperform rating for the bank, this time seeing a valuation of $51 per share as of late April 2025, calling for a net upside potential of 15.1%.
With momentum behind it and a reasonable view to expect further EPS growth, investors can’t blame Deutsche Bank buyers for jumping into the stock ahead of the next quarterly earnings announcement.
Earnings Growth Ahead for Wells Fargo
[content-module:CompanyOverview|NYSE: WFC]Compared to today’s reported $1.39 in EPS, Wall Street analysts forecast that Wells Fargo can report a net jump of 16.5% in EPS, as the fourth quarter of 2025 is expected to see up to $1.62 in EPS from this name.
As investors know, where EPS growth goes, so does the stock price.
And in the case of Wells Fargo, this bank didn’t miss out on its share of analyst optimism.
With an Overweight rating out of Barclays, analyst Jason Goldberg thinks that Wells Fargo stock can trade up to $87 per share, daring the stock to trade higher by 15% from today’s price to nearly match the expected EPS growth over the coming quarters.
With all of these factors in mind, driven by the broader steepening of the yield curve, investors can come to justify the ways that markets are rewarding these names with bullish momentum ahead of potentially better earnings.
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