In my note yesterday, we talked about the setup for a coming IPO boom.
We looked at the parallels between the current environment and the late 90s environment, which led to a record number of companies going public. And we talked about the related multi-bagger stock performance that the IPO frenzy delivered for the leading investment banks (the underwriters).
That said, the bank stocks have already had a huge run since this summer.
On average, this basket (BAC, JPM, MS, GS, C) is up 28% since June 23rd — almost doubling the performance of the S&P.
What happened on June 23rd?
The newly confirmed Vice Chair for (Bank) Supervision at the Fed, Michelle Bowman, delivered a speech that was a major signal that bank regulators would amend the bank leverage ratio rule, (in her words) a "long overdue follow-up to review and reform what have become distorted capital requirements."
This was the (very late) correction to a regulatory pendulum that swung too far after the Global Financial Crisis.
Bowman was telling us, they're going to (finally) fix it.
As we discussed in my late June notes, it was "huge news for the big banks." And it was huge news for broader markets, as it freed up the banks to start providing liquidity in the Treasury market, which reduced risks of a liquidity shock (which were building).
With all of that, the bank stocks have been hot on this deregulation catalyst, and now the IPO and M&A cycle looks like it's just about to ramp up.
