The U.S. economy is set to receive several tail winds in 2026, making banks one of the most attractive sectors to invest in, according to Bank of America. Analyst Ebrahim Poonawala said he is "overweight banks in a 'run-it-hot' U.S. economy," noting that Federal Reserve rate cuts, increased tax refunds for consumers, deregulation and "ample credit availability" will drive growth in the new year. The Fed is expected to lower its benchmark overnight rate at least twice in 2026, according to the CME Group's FedWatch tool . On top of that, the average tax refund is projected to rise slightly when 2025 returns are filed — at the same time as the Trump administration continues to ease regulations for companies. The recent performance in banks may serve as a preview of what's to come. Four trading days into 2026, the Invesco KBW Bank ETF (KBWB) has jumped 5.2%, outpacing the S & P 500's 1.5% advance. Here are some of the fund's biggest gainers so far: Goldman Sachs : up 8.7% Capital One : 6.4% Citizens Financial : 6.4% Comerica : 6.4% Fifth Third : 6.3% KBWB YTD mountain KBWB in 2026 Poonawala also said the group trades at an attractive valuation. He said the lenders offer "defensibility with [global systemically important banks] trading at 14x 2026 P/E or 30% discount to 20x for S & P equal weight." "GSIB re-rating [is] anchored in fundamentals, driven by 1) reduced cost of equity as banks regain control of capital management and a benign credit outlook; 2) improving ROTCEs as scale/diversification synergies extracted; 3) reframing of these institutions as secular growth stories that are no longer plagued by ever rising and unpredictable regulations; and 4) improved competitive positioning vs non-banks," he said, referring to return on tangible common equity. Among the analyst's picks to play a potential bank boom are Goldman Sachs, Morgan Stanley , Citigroup and Bank of New York Mellon . He also highlighted some "super-regionals" such as KeyCorp and Citizens .
