Why Cava Is Bullish on US Banks: Yield Curve, AI Fee Revenue, and the Stablecoin Windfall

Banks are not a fashionable investment in the current cycle. The capital and attention of retail investors is concentrated in semiconductors, AI software, and the space sector. That is precisely the kind of environment in which José Luis Cava tends to find his most interesting ideas.

In the latest installment of his "Why Am I Bullish?" series, Cava makes a structured case for US large-cap banks — combining fundamental analysis, macroeconomic context, AI sector dynamics, and a specific technical entry strategy.

The Methodology: Sector First

Before the specific thesis, Cava explains the filter that led him here. In his investment process, the most important variable when selecting an individual asset is not the quality of the company — it is the trend of the sector and industry it belongs to. Sector dynamics account for approximately 50% of a stock's price movement. A buy signal in a sector with a strong uptrend has a dramatically higher success rate than the same signal in a sector under structural pressure, regardless of the individual company's fundamentals.

The US banking sector passes this filter. By relative strength analysis, KBWB — the Invesco KBW Bank ETF, which concentrates exposure in the largest US banks — is outperforming both the broader financial sector ETF (XLF) and the more diffuse banking ETFs (KBE, KRE). The strongest names within the sector are Morgan Stanley and Goldman Sachs. When the leading names within the leading subsector are the ones driving performance, the trend has structural quality.

The Fundamental Case: Three Tailwinds

First: the economy is growing. The New York Federal Reserve's current estimate for US GDP growth is 2.7%. This is not a recession scenario. Banks earn more when the economy expands — loan demand rises, credit quality remains strong, and provisioning requirements fall. The large US banks currently show growing balance sheets, high credit quality, and controlled funding costs.

Second: the yield curve is positively sloped. The spread between the 10-year and 2-year Treasury yields is positive — meaning long-term rates are higher than short-term rates. This is the natural environment in which banks make money: they borrow at short-term rates and lend at long-term rates. An inverted or flat yield curve — as seen during 2022-2023 — compresses net interest margins and creates the "bank stress" headlines that periodically alarm markets. A steepening curve does the opposite: it mechanically improves profitability across the sector.

Third: AI creates three new revenue channels for banks. This is the less-discussed angle in the banking sector bull case.

The most immediate channel is IPO and placement fees. The largest investment banks — Goldman Sachs, Morgan Stanley, JPMorgan — are the underwriters of the major technology offerings of this cycle. SpaceX's $75 billion IPO generated hundreds of millions in fees. The coming offerings of OpenAI, Anthropic, and other AI-native companies will generate more. Each offering is booked as revenue that has nothing to do with credit quality or interest rates.

The second channel is internal productivity. Every major bank is deploying AI across compliance, risk management, trading desk operations, and customer service. The cost reductions are compounding and the productivity gains are beginning to show in operating margins.

The third channel — and the most underappreciated — is stablecoins. The regulatory framework for dollar-denominated stablecoins is advancing rapidly. Banks are positioned to be the primary issuers, custodians, and settlement infrastructure for a stablecoin market that could reach trillions in circulation. Every stablecoin in circulation earns the issuer the interest on the underlying reserve asset. At current interest rates, a trillion dollars in stablecoins generates tens of billions in annual income. This is a nascent revenue stream whose scale is not yet reflected in bank valuations.

The Technical Picture: Patience Required

KBWB broke a significant resistance level at $88 in mid-May 2026. That level had acted as a ceiling for months, held in place partly by heavy options call selling at that strike. When it finally gave way, the move was decisive — the ETF rallied nearly 25% from the breakout.

At the time of Cava's analysis, the ETF had reached levels that he characterizes as overbought relative to the strength of the move. His response: he sold his position entirely. Not because the thesis is wrong — it isn't — but because buying into a 25% rally without a pullback creates an unfavorable risk-reward ratio. The expected value of an entry in overbought territory is negative even when the longer-term direction is correct.

The strategy is to wait for the correction to identify the entry zone.

Below $91.91, there is a cluster of stop-loss orders from investors who entered during the breakout rally. If the price drops below that level, those stops will be triggered, accelerating the move downward and creating the oversold conditions that produce the best entries. The target zone Cava is watching: $88 to $89.30 — back at the level that was resistance for months, now acting as support.

As of June 25, 2026, KBWB trades around $92.40 — approximately 4% above the entry zone. The broader market correction currently in progress, driven by the algorithmic deleveraging following the KOSPI collapse, may deliver that gap over the coming days.

The European Vehicle: BNKS and IUS2

European retail investors cannot easily access KBWB directly. The UCITS-compliant alternative Cava identifies is BNKS — the iShares S&P U.S. Banks UCITS ETF — listed on the London Stock Exchange in USD (ticker: BNKS) and on Xetra in EUR (ticker: IUS2).

The structure matches what European investors need: it is an accumulation fund — dividends are reinvested rather than distributed, deferring the tax liability until the position is sold. The total expense ratio is 0.35%, which is reasonable for the level of exposure. The ISIN is IE00BD3V0B10, domiciled in Ireland.

The Xetra listing under IUS2 is likely accessible through most European retail platforms. For investors who prefer to manage their positions in euros, this avoids the currency conversion friction of the London-listed dollar version.

The Discipline That Makes the Strategy Work

The most instructive part of Cava's analysis is not the thesis — it is the behavior. He was bullish on US banks, identified the correct vehicle, entered at the breakout, captured a 25% gain, and then sold. Not because the thesis changed. Because the price moved too far too fast, and the risk-reward of holding became unfavorable relative to waiting for a better entry.

This is the discipline that separates structured speculation from amateur investing. The ability to say "I still believe in this sector, and I am not going to buy it at this price" requires a clear framework — an identified entry zone, a defined stop level, and the patience to wait for the price to come to the analysis rather than chasing the analysis to the price.

The $88 to $89.30 zone is where that patience is expected to be rewarded.

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Analysis based on José Luis Cava's 'Why Am I Bullish?' series, episode on US banking sector, published June 2026. This post is for informational and educational purposes only and does not constitute investment advice.