Bank stocks closed the week on a high note, on Friday logging their best day since November, and some strategists say there's more room to run.
The S&P Bank exchange-traded fund (KBE) rose over 2.5 percent in Friday trading as JP Morgan Chase, Wells Fargo, Bank of America and Citigroup contributed the most gains, respectively.
A day ago, President Donald Trump signed executive actions "that represent the beginning of the end of the Dodd-Frank mistake," the White House said in a statement, referring to the Dodd-Frank Wall Street Reform and Consumer Protection Act, which increased regulation on the financial services industry in the wake of the financial crisis.
Trump has been critical of Dodd-Frank, vowing to "dismantle" the framework of the 2010 act, credited with fueling the fire under banks' rally after the U.S. election in November.
The KBE and the S&P Regional Bank exchange-traded fund (KRE) both rose over 2.5 percent Friday and posted their best day since November 14th, when they rose 2.72 and 2.71 percent, respectively. And the S&P 500 financial sector also led the pack Friday, as financials rose nearly 2 percent and also turned in its best day since November 14th.
Of course, the yield curve is also a big factor in the banks' rally and has undoubtedly helped boost those stocks. Differences between short- and long-term rates are seen as positives for the banks, since they generally borrow money in the short-term and lend it in the long-term.
"Obviously, the banks have come a pretty long way," Mark Tepper, CEO of Strategic Wealth Partners, said Friday on CNBC's "Power Lunch."
Tepper said that there's a lot of optimism surrounding the banks, due to expectations of reduced regulation, rising interest rates and expectations of an expanding economy under President Trump's administration.
Taking a look under the surface, however, Tepper pointed out the financial sector carries the second-lowest price-to-earnings ratio of all sectors. He believes there is room to run for the group under President Trump.
Tepper added that he likes banks at these levels, but within the financial sector he prefers consumer finance stocks, like Capital One or Discover, citing rising consumer confidence.
Indeed, banks have been huge outperformers since the election, noted Stacey Gilbert, head of derivative strategy at Susquehanna.
"A lot of the good news is priced in," to bank stocks, she said Friday on CNBC's "Power Lunch," pointing to the regional banks, up 27 percent since Election Day. And regional banks as measured by the KRE, she noted, have also surged.
"We would make the argument that the market has shifted to be a more neutral sentiment here," Gilbert said.
As banks have rallied so far, Gilbert said she would suggest that investors look for protection at these levels, perhaps buying "protective puts" in the KRE, versus selling upside calls, in the case of a pullback.
And in some of the banks in the KRE basket, Gilbert said: "we've seen a number of over-riders; this is investors basically saying, they've enjoyed the stock run here, but we see upside limited in the near-term here, and we could argue that from a valuation side, as well."
JP Morgan in January reported quarterly earnings per share that beat analysts' expectations, and Citigroup reported earnings that beat the Street's expectations, but missed on revenue.
