Banking on Looser Regulation

Bank stocks popped today after Reuters reported that the Fed is considering relaxing a regulation, i.e., the GSIB Surcharge. It requires big banks to hold additional capital due to the systemic risk they pose to the global financial system. Tweaking the GSIB surcharge would free up big banks to lend more.

The S&P 500 Financials stock price index had already been doing well. It is up 37.9% since the start of the bull market and 10.8% ytd (chart). The sector may be on the verge of breaking out to new highs led by the banks. Such broadening would be a very healthy development for the bull market.