BAC Stock Forecast: Bank of America Benefits From Increase in Interest Rates

This article was written by Blair Goldenberg, a Financial Analyst at I Know First, and enrolled in a Masters of Finance at Colorado State University.

BAC Stock Forecast


  • Bank of America Background
  • Bullish BAC Stock Forecast
  • Donald Trump Stimulus Package and Interest Rates
  • I Know First Algorithm Bullish Forecast For BAC

Bank of America Background

Bank of America Stock Forecast

Bank of America (BAC) is an American multinational banking and financial services corporation headquartered in Charlotte, North Carolina. It is the second largest bank holding company in the United States by assets. As of 2016, Bank of America is the 26th largest company in the United States by total revenue. In 2016, Forbes listed Bank of America as the eleventh largest company in the world.

BAC Stock Forecast

Bank of America (BAC) is known as a dividend growth stock with increases of 650% in the last two years with current dividends of $0.075 paid quarterly. The stock itself costs $22.60 as of December, 25, 2016.

screen-shot-2016-12-25-at-3-06-52-pmOn December 23, 2016, BAC’s put option of $14.50 per share expired, the stock at that price was one of the highest implied volatility option stocks. Because of the high implied volatility, the share price could suddenly and quickly fluctuate up or down, either creating a bull market rally or large scale sell offs. Currently, analysts are betting on bullish returns for BAC. Zacks gave BAC a “buy” rating and is #2 on the Banks-Major Regional industry. Overwhelmingly, analysts have estimated the rise of the share price with 1 out of 8 analysts estimating a downtrend.


With the rise of interest rates, big banks are being stimulated by new tax reforms, deregulation, and the possibility of investment into new infrastructure. In the past few weeks, BAC has skyrocketed, up to 33%. The bank will ultimately benefit from the rise in interest rates that will follow President-Elect Trump’s stimulus package. The bank will continue benefitting because it is estimated that the rate increase will continue for the next few years and will ultimately help BAC reach their profitability target of 12% return on tangible equity. With all of these reasons, BAC may become one of the best stocks in the next 5 years.

Donald Trump Stimulus Package and Interest Rates

The stimulus package that Donald Trump is proposing once he takes office has a large hand in why BAC has gone up substantially. Because of his package, interest rates have jumped recently, which has benefitted the banking industry and will continue to do so as long as the plan goes through. Last week, the Fed increased interest rates because inflation would be on an upwards rise when Trump begins his stimulus plan. The Fed has only increased interest rates twice in the last two years and there may be a third hike on the horizon.

This also effects BAC because the bank relies heavily on how the interest rate is doing in the market due to interest rates being a large part of the business they partake in. The interest rate hikes specifically effect the loan book part of BAC, in other words, this effects credit lines and mortgages. The interest rate also has an impact on savings accounts and cash investments. The net interest margin is the difference between the amount the borrow pays and what the saver earns, with an interest rate hike, the margin between the two will ultimately increase, creating more revenue for the bank.

If you’d like to know more about the increase in interest rates, click here.

I Know First Algorithm Bullish Forecast For BAC

I Know First currently maintains a bullish stance on BAC with signal strength 96.49 and predictability 0.72 for 1 year forecast.


In the past I Know First was also bullish on BAC. This bullish Forecast on BAC was sent to current subscribers I Know First on November 15, 2016, where BAC had a signal of 257.02 and a predictability of 0.38. US 10Y reached 15.77% in returns.

BAC stock forecast

I Know First Algorithm Heatmap Explanation

The sign of the signal tells in which direction the asset price is expected to go (positive = to go up = Long, negative = to drop = Short position), the signal strength is related to the magnitude of the expected return and is used for ranking purposes of the investment opportunities.

Predictability is the actual fitness function being optimized every day, and can be simplified explained as the correlation based quality measure of the signal. This is a unique indicator of the I Know First algorithm, allowing the user to separate and focus on the most predictable assets according to the algorithm. Ranging between -1 and 1, one should focus on predictability levels significantly above 0 in order to fill confident about/trust the signal.


Bank of America hasn’t even gotten started on its bullish path. The bank has just began its journey and will only continue to grow in the next coming years with the interest rates growing. Right now is the perfect time to invest in Bank of America because the share price is just beginning to rise. After Trump is sworn into office, interest rates will continue rising, up to and after the stimulus package is in effect, thus pushing the bank’s price per share higher.