Business & Investment

Refre nation?This time, the tailwind after the crisis favors banks and the economy.

Ten years ago, banks were at the heart of the financial crisis that led to the Great Depression. Lenders like banks have allowed the mortgage market to surrender the financial system, and after the burst of the bubble they have been plagued by low demand, tighter regulation and lower interest rates for years.

Now there is no more difference. When the Corona crisis broke out, banks were undoubtedly overcapitalized and survived the crisis better than everyone expected. Now they appear to be ready to ride a historic rebound in step with the economy, rather than the albatrosses around their necks.

“Banks are in a similar situation to consumers,” said Keith Lerner, chief market strategist at Truist Advisory Services. “You wouldn’t have expected the consumer sector as a whole to be so successful through the shock to such a system.”

In an interview, Lerner was unaware of the worst concerns about unemployment, defaults remained relatively low thanks to massive fiscal and monetary easing, and households were blocked to pay off debt and build up savings. You are using the stimulated money and time.

As a result, he believes that a “spring load” economy is likely to emerge in the vaccinated world. A year later, consumer demand, including high-priced products such as home appliances, has stagnated, supported by the payment of fiscal stimulus measures.

Similarly, TCW’s senior portfolio manager, Diane Jaffee, said banks were in recession with huge reserves. In fact, just before the pandemic, New regulations have been enforcedDemand lenders to hold more of their books.

And throughout 2020, the pandemic nightmarish early dreamed worst-case scenario never came true. “Literally, we expected 25% unemployment!” Jaffy said.But banks have set aside a small amount and continued Commission income generated from their mortgages Through government stimulus.

Perhaps even more important than the macroeconomic background is the market background.After years of head fake, 2021 may be the year the bank finally had Interest rates on their side..

Not only does the yield curve steep, widening the gap between bank borrowing and lending rates, but also 10-year government bonds.

Consistently a little higher than before, “banks are beginning to show stable net interest income,” Jaffy said. “They aren’t just losing money all the time. You don’t have to keep making significant cost savings just to combat losses.”

In fact, JPMorgan Chase & Co, the largest bank in the country. Is
+ 0.11%

Reported “historical” margin That third quarter, Jaffee pointed out, including a 19% return on tangible common stock. She said it was the “moment of dropping the microphone.”

It may also be the year when decades of bond bulls are over. Jaffee believes that if bond prices fall and yields rise, corporate issuers are more likely to ask banks to lend to meet their funding needs.

JPMorgan is the first company to start fourth-quarter earnings next Friday, followed by Wells Fargo & Co.

Analysts haven’t released a concrete earnings quote yet, but their first survey is bullish.

“Even after the”Blue Wave’ We believe there are cases of absolute P / E expansion, torn, the relative PE of banks is still attractive, “Jeffreys analysts wrote Thursday. Invesco KBW Bank ETF
It’s been closely tracking the sector, but has increased by more than 11% in the past month as Congressional Democratic Sweeps and the White House seemed more likely. The fund’s profit of 17.6% in November was the highest ever since 2012 and the highest since 2009 in the broader financial sector ETFs.

“Loan growth could ultimately benefit strong deposit growth, improved cost control and resumption of repurchases,” Jeffreys analysts concluded.

Jaffee agrees. “I’m very confident that banks can continue to pay dividends and even raise them,” she told MarketWatch.

Looking ahead to last week, investors will receive a report on US inflation on Wednesday December when the government releases CPI figures. December retail sales and a large amount of manufacturing data will also be released on Friday.

Last week, Dow Jones Industrial Average 30 stocks average
+ 0.18%

S & P 500 rose 1.6%
+ 0.55%

Nasdaq Composite Index, up 1.8%
+ 1.03%

With the addition of 2.4%, all indexes ended with new record highs.

Read next: What will 2021 bring to ETFs?

Refre nation?This time, the tailwind after the crisis favors banks and the economy. Refre nation?This time, the tailwind after the crisis favors banks and the economy.

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