The Commonwealth Bank of Australia (ASX: CBA) share price surged 5.5% to $76.87 this morning as investors pile into the stock on the back of the Coalition's shock federal election win over the weekend.
The result means Labor's plan to scrap franking credit cash refunds to eligible shareholders has been most likely permanently smacked-down as political suicide to mean the franking credit paying blue-chip favourites of SMSF investors and retirees are soaring across the board today.
Other blue-chip banks like Australia & New Zealand Banking Group (ASX: ANZ), Westpac Banking Corp (ASX: WBC) and National Australia Bank Ltd (ASX: NAB) are up between 6% to 7.5% today and doing the heavy lifting to send the wider S&P/ ASX200 (ASX: XJO) index to a post-GFC high.
Banks are receiving extra attention as commentators or analysts commonly believe that the Coalition win will also support residential property markets due to the canning of Labor's proposals to reform negative gearing tax breaks for property investors.
Moreover, currency markets are now betting heavily on the RBA cutting benchmark lending rates by 0.25% this June in another fillip for Australia's sagging residential property markets.
Outlook
I am often asked should you buy bank shares and if so which is the best? In my opinion the better quality of CBA's loan book, return on equity, and technological edge over its competitors means it's the best option for anyone interested in bank shares despite its marginally higher valuation.
Quality rules in the share market over the long term and you just have to compare CBA's track record for shareholders compared to its competitors to understand this.
Therefore a stock like CBA might not be a bad option for a retiree after income in today's low rates world, but it's not going to offer the kind of handsome capital growth that tomorrow's blue chips could offer…
Both the businesses named in the report below I am personally familiar with and in my opinion they're definitely two of the strongest candidates on the local market for huge gains in the 5 years ahead….
