Bank of America Corporation (BAC) stock is currently trading at $25.58 in the pre-market session. The stock is up 1.47%, and climbing fast. Of course, the most important news for the banking industry will come from the Fed. On Tuesday and Wednesday next week, the Fed FOMC will be convening to discuss monetary policy, vis-à-vis the federal funds rate. The consensus among leading analysts and policymakers is that Fed chair Janet Yellen will pull the trigger on an interest rate hike. We can expect the FFR to increase to 0.75% – 1.00% in short order, driving up demand for the USD and propelling bank stocks to new highs. Bank of America is one such stock that is slated for liftoff.

What is News with BAC Stock this Week?

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Believe it or not, the post-election surge in the price of Bank of America stock has been astronomical. Since November 8, 2016, BAC stock is up 51.84%. This is far greater than the impressive performance of the PowerShares KBW Bank ETF price change which is just 29.82%, and the S&P 500 index which is up 12.15%. However, a caveat is in order: regulatory reform will be necessary to help BAC stay at these lofty levels.

It is not enough for the White House to push a narrative that Congress or the Fed refuses to follow. Simply put: tough talk won’t matter if lawmakers do not approve of orders coming from the White House. The financial services industry is heavily regulated, and Trump campaigned to deregulate the financial sector ‘big-league’. Given the opposition he has faced on so many issues of late, it is unlikely that he will get his way with Congress.

If Trump’s plans to deregulate the financial services sector fail, BAC stock could be in for a rude awakening. The lofty increases in the stock price are impressive on paper, but not based on fundamentals at this juncture. Speculative sentiment is driving bank stocks. Traders are hoping that corporate taxes will be reduced in the region of 15% – 20%, and that layers upon layers of unnecessary regulation will be peeled back. This will likely be addressed with Dodd-Frank, which sought to impose checks and balances on big banks and centralize control over their activities with the government.

The postelection surge that we have seen in BAC (up 14.07% for the year to date), could evaporate in the blink of an eye. Consider that the stock opened in 2017 at $22 per share, and while the nominal gains are minimal in dollars, they are substantial in percentages.

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Now in his second month as president of the United States, Trump has failed to inspire confidence across the board. His tough talk and fiery speeches are being bogged down by lawmakers who refuse to budge on passing legislation. The courts have weighed in on various executive orders, pulling the rug from under them and rendering them obsolete. For now, Trump is largely at the mercy of the legislature and the judiciary – a toothless tiger. His ideas resonate with the population, but the checks and balances simply don’t add up.

As a trader of BAC stock, it’s important to note that this stock is not overvalued.

A year ago, BAC stock was trading at a 40% discount on book value, but there is still tremendous upside potential in BAC. In 2016, BAC generated a return on equity of 9.54%, approximately 2.46% beneath its objective, but significantly better than the ROI in 2015. If Trump cannot make good on his promises for deregulation, lower corporate taxes and a fiscal boom, traders still have a Trump Card up their sleeve, and this is one that will certainly not disappoint the BAC Bulls…the Federal Reserve Bank is going to pull the trigger and that means the runway has been lit up big-league for bank stocks!