A bank ETF could bounce if inflation data is cooler than expected, Bank of America says

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Ishares Russell 2000 ETF News

SPDR S&P Regional Banking ETF,Markets,Investment Strategy

Here's how Wednesday's consumer price index report could affect a regional bank ETF.

The rapid shift in expectations away from multiple rate cuts this year may have created a trading opportunity around Wednesday's inflation data, according to Bank of America. Equity and quantitative strategist Ohsung Kwon said in a Monday note to clients that markets appear to be pricing in bad news for inflation and, by extension, higher for longer interest rates.

Straddles are a type of option that let investors bet on volatility in either direction. Regional banks have been pressured by higher interest rates, which have devalued some of the loans and bonds on their books. If lower inflation readings led to quicker rate cuts from the Federal Reserve, that would help the sector avoid more failures such as occurred with Silicon Valley Bank and First Republic in 2023.

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