![]() Generally, in a recessionary backdrop, that's about where they go. ![]() They're already down, for the most part, on the big bank side, 25% to 30% from their highs. So this isn't the beginning of the sell off. And we think they will.Īnd then the second point is where we're already pricing these stocks. And we think that will happen here again once financial markets stabilize. But earnings power actually goes up in a higher rate environment. You have to work through some of the near-term uncertainty. But I would maybe take a step back and just talk about what is happening longer term with these business models and also where are they trading from a valuation perspective.Īnd so our view is that, over the long-term, higher rates will be positive. And no doubt, there's some negative news and uncertainty in the market. When people are nervous, financials are not really a defensive area.Īnd so you're seeing that play through, I think, in the stocks right now. When people feel good about the economy, financials tend to do well. ![]() And so, financials are really, I think, at the center of the economic outlook. So I think right now the whole market is focused on the macro outlook, what's going to happen with the economy as a result of tighter financial conditions and higher interest rates.Īnd so that's creating a lot of gyrations through not just equities but all risk assets and all market prices. But on the other hand, if it's coming with a recession, maybe not.ĭEVIN RYAN: Exactly. Because yes, rates going higher, traditionally seen as a good thing. So give us the big picture here as we look at what's going on with financials. Devin, it's always good to catch up with you. In other words, there's a lot going on when it comes to the financials.ĭevin Ryan is with us now, director of fintech research at JMP Securities, a Citizens company. On the flip side, fintechs seeing a- brokerages really, seeing a reprieve in the SEC's decision not to ban payment for order flow. Concerns grow in a souring market about an economic slowdown as well.īanks this week were taken to task during a Senate Banking Committee hearing over their use of Zelle and their co-ownership of that service. Big banks adjusting to a hawkish Fed raising rates. The Financial Select Sector ETF ( XLF) is higher this morning.JMP Securities Director of Financial Technology Research Devin Ryan joins Yahoo Finance Live to discuss global interest rate action among Central Banks, a hawkish Fed, market swings, and economic uncertainty. ![]() ![]() He thinks that Apollo ( APO) will beat expectations and Blackstone ( BX) will miss among the alternative asset managers. Among the e-brokers, he thinks E*Trade ( ETFC) will come in ahead of expectations, while he's modeling an in-line quarter for TD Ameritrade ( AMTD) and Charles Schwab ( SCHW). Ryan is above consensus estimates for both Goldman Sachs ( GS) and Morgan Stanley ( MS). DEVIN RYAN JMP UPDATEIn this report, we provide more detail around our expectations for the quarter, thoughts on valuation, and an update on broader industry trends. One the other hand, while we think the stocks are generally pricing in the current interest rate curve and asset prices, we believe interest rate and asset price views could still improve if positive economic momentum continues, and tax reform could represent a catalyst for that. We believe valuations now reflect a continuation of a positive backdrop, and if perceptions around any of these themes deteriorate, current enthusiasm in the group could wane. E think the three main themes supporting this have been: 1) a recovery in interest rate expectations into quarter-end 2) higher asset prices which are directly supporting financial stock appreciation and also have positive implications on a number of business lines and 3) an improvement in the perceived probability for tax reform, which the market believes will directly boost earnings coupled with benefits from second derivative stimulative economic effects. ![]()
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