Record profits at major banks could keep the stock rally alive

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<pre><pre>Record profits at major banks could keep the stock rally alive

In 2018, the largest U.S. banks made more than $ 120 billion, an all-time high. The last year may have been even better.
We'll find out soon. This week the six largest US banks – JPMorgan Chase (JPM). Wells Fargo (WFC). Bank of America (BAC). Citigroup (C). Morgan Stanley (MRS) and Goldman Sachs (GS) – should show the results for the last three months of 2019.
Analysts are optimistic that a healthy US economy, a more stable interest rate picture and solid credit growth have led banks to another record year.

"We expect the fourth quarter [last year] do better than the fourth [quarter the year before]"Stephen Biggar, director of financial institutions at Argus Research, told me that this would lead to a record result.

The recent challenge for banks has been to ward off the effects of lower interest rates that affect their credit gains.

However, lower interest rates also encourage more customers to borrow money – for example, by paying off corporate debt or taking out a mortgage. Meanwhile, employment growth has been steady and consumer spending remains high, making Biggar's lending costs lower than at this point in the cycle.

"If you have a job, [or] you lose one and can easily find another, then you are currently on your bills and you do not have these default settings, "he said.

Investor Insight: Bank stocks recovered in the last quarter of 2019. The KBW Bank Index rose by around 13%, while the S&P 500 rose by 9%.
The main reason for these gains is the clear communication about the Federal Reserve interest rates. The central bank announced in December that after three rate cuts in 2019, it plans to keep rates stable in 2020. This helps banks by pushing borrowers off the sidelines who may have been waiting for an even lower interest rate.

The big picture: US banks are starting a busy profit season. FactSet predicts a 2% drop in the overall result of the S & P 500. Should this outlook change, analyst John Butters said it would be the first time since mid-2016 that the index saw earnings decline for four quarters from a year earlier.

A step forward in the trade battle between the United States and China

Almost two years after the US-China trade dispute, the signing of the US-China "Phase 1" trade deal expected on Wednesday will be a symbolically important moment – even if investors' reaction is slow.

The latest: China announced last week that Liu He, the country's leading trade negotiator, will travel to Washington to sign the agreement. Trump said the signing would take place on Wednesday or "shortly after".

US officials and others familiar with the agreement said the agreement includes some reductions in existing tariffs and China's commitment to buy more American goods and services. China is also said to have agreed to make structural changes in the handling of intellectual property rights.

One big limitation: it is difficult to know what has been agreed since the text of the "Phase One" agreement has not yet been published.

The deal doesn't mean that the standoff between the world's two largest economies is over. "Phase two" is expected to involve deeper problems that may be more difficult to solve.

In addition, the United States remains committed to allies to avoid Chinese telecommunications equipment supplier Huawei building next-generation 5G networks. No ceasefire will be stable as long as the fight for technology continues behind the scenes.

Next

Monday: New Boeing (BA) CEO begins
Tuesday: China trade data; US inflation data; Delta Airlines (DAL). Citigroup (C). JPMorgan Chase (JPM) and Wells Fargo (WFC) Report result
Wednesday: Bank of America (BAC). BlackRock (BLK), and Goldman Sachs (GS) Report result
Thursday: US retail sales; Charles Schwab (SCHW) and Morgan Stanley (MRS) Report result
Friday: China GDP; Federal road (STT) reports result