This recent market turmoil was brought to you by the letter “P”. Prices that are rampant. U.K. Pension funds that are creaking. All investors want is to be shown the possible path to a pivot please. Unfortunately, Thursday’s consumer inflation numbers did not help, coming in higher than expected, and thus offering little indication that the Federal Reserve’s increases in borrowing costs will soon hit their peak.
Sentiment toward the banking sector, which kicks off the earnings season on Friday, therefore will remain depressed say analysts at Bank of America led by Ebrahim H. Poonawala. The S&P 500 Banks Industry Group Index
is down 29.7% for the year to date, worse than the broader market’s 25% drop. The derating has been driven by “perceived risks” tied to the economic outlook even though fundamentals — robust lending, improving net interest margins — have remained strong, according to Poonawala. “We expect the damage caused by runaway inflation (and reactionary monetary policy) to weigh on the fundamental growth outlook. This means slowing loan growth, rising credit costs and an eventual peak in net interest margins. These have the potential to drive another leg lower in the group,” he adds. With that in mind, here’s what BofA thinks of the big banking beasts due to report in the next few sessions. And despite repeated criticism in Congress over its many scandals, Wells Fargo
may be the best positioned bank. Wells Fargo is relatively immune from the fading Wall Street activity, in equity trading and investment banking in particular, that may drag rivals. “But [Wall] Street will need validation that share buyba …