One of the hallmarks of the banking industry, and indeed many sectors of the overall stock market, is seasonality. Some businesses simply tend to perform better during different times of the year due to both consumer trends and macroeconomic factors. These types of stocks are known as cyclicals, and banks are among the most prominent.
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Although not all banks move in lockstep, Goldman Sachs and JPMorgan Chase are among the industry leaders, so they often chart the direction for their fellow financial services firms.
While seasonality shouldn’t be the only reason that you invest in a stock, here are some of the reasons why big bank stocks like Goldman Sachs and JPMorgan Chase may have a good spring ahead of them.
Loans are one of the key profit drivers for banks. The entire banking sector is built on the premise of taking in money from depositors and loaning it out to businesses and individuals at higher rates.
While that’s obviously a gross simplification of how banking works, the bottom line is that when demand for loans increases, so too do bank earnings. Springtime is generally when contractors and other businesses start borrowing more money as their seasonal workflow picks up. This can translate to increased earnings for banks.
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Although the severity of winter varies from state to state and city to city, overall economic activity tends to pick up as the country comes out of its winter thaw. According to the Chicago Fed, employment tends to pick up in spring, which puts more money in the pockets of consumers, who are large drivers of the U.S. economy.
Housing construction, listings, and sales tend to pick up as the weather improves, and the auto industry typically does better in spring and summer as well. And when general economic activity increases, so too does banking activity.
The consumer is by far the biggest driver of the U.S. economy. According to the U.S. Bureau of Economic Analysis, consumer spending was responsible for 68% of the entire U.S. gross domestic product (GDP) in quarter four of 2024.
So, when the consumer has money and spends it, economic activity picks up. This includes financial institutions like Goldman Sachs and JPMorgan Chase, which benefit from increased deposits, credit card usage, investments and other financial transactions. So, when taxpayers receive their refunds in April every year, it sets in motion all of this economic activity, much of which trickles down to the banks.
