I'm starting to become bullish on ASX bank shares in 2020.
Everyone knows that ASX bank shares have been under the pump this year as the coronavirus pandemic has spooked investors.
Commonwealth Bank of Australia (ASX: CBA) and Macquarie Group Ltd (ASX: MQG) shares fell from 52-week highs to 52-week lows in the March bear market.
But I think the two Aussie majors could be back in the buy zone before the year is out.
Why Macquarie shares could climb this year
The reason I'm bullish on Macquarie shares is actually thanks to US investment bank, Goldman Sachs. More specifically, Goldman's strong first-half earnings and what that means about what could be in store for Macquarie.
Goldman posted net revenues of US$22.04 billion and net earnings of US$3.64 billion for the 1H FY20. That's a solid result at a time when investment banking income could have easily dried up.
Much of that result was driven by strong trading income amid the recent market volatility. A big portion was also due to Goldman's run of recent capital raisings in Australia and around the world.
That could bode well for Macquarie as a fellow (albeit smaller) investment bank.
If Macquarie's traders can generate similarly strong earnings, it could help offset some losses from the economic slowdown. A series of recent capital raisings could also help support the bank's half-year earnings result in November.
What about the CBA share price?
That's not an easy question to answer. What I think the Goldman Sachs result shows is that hope is not lost for bank shares.
Commonwealth Bank is much more of a retail and business bank compared to Macquarie. That means the fundamental drivers are different and rely on strong corporate earnings and the Aussie housing market.
However, this leading fundie is starting to see a bullish recovery for ASX bank shares. If the economy bounces back quicker than expected, the CBA share price may be cheap at $72.60.
That's because investors are pricing in the expected future impact of the pandemic and subsequent recession. If the recovery beats expectations, you'd expect Commonwealth Bank shares to outperform.
Foolish takeaway
There's a lot of uncertainty in the economy and share market right now. Commonwealth Bank shares could be headed higher, but that relies on a quicker than expected economic recovery.
Macquarie shares may benefit from continued market volatility, but further declines could force the ASX bank share lower in 2020.
