Displaying items by tag: banks

(Washington)

There have been a handful of articles lately presenting how one can protect their portfolio from the current trade war (hint, stay away from food companies and autos). But there have been many fewer saying how to buy into the trade war. The answer is that investors should buy less vulnerable sectors, such as semiconductors and biotechnology, which will not be as impacted by tariffs. Banks are also likely to prosper as the economy continues its run.

FINSUM: We think the idea of biotech and banks is quite a solid one. Both seem to have little direct exposure to tariffs.

(New York)

Before President Trump got elected, and immediately after, there was a great deal of excitement that financial firms were going to experience a flourishing as the US cut back heavily on financial regulation. 500 days in that hope has failed to significantly materialize. While small and medium sized banks have benefitted, and the DOL’s fiduciary rule is gone (great for wealth management), large banks have not seen gains. For instance, the Fed has made stress tests for large banks more stringent.

FINSUM: Banks had the prop trading rules (Volcker rule) weakened recently, so that is positive, but otherwise there hasn’t been much change.

(New York)

In what might be a sign of a rough patch to come for the global economy and markets, 16 of the largest global banks have collectively just entered a bear market, falling 20% from their peak. Those 16 come from among the 39 global “sifis”, or systemically important financial institutions. One research analyst says “If these banks are supposed to be systemically important then policymakers ought to be watching them to see what is happening”.

FINSUM: The odd part about these falls is that rising interest generally help banks, as they have wider net interest margins. So why the downturn?

(Washington)

A lot of financial industry participants have been hoping that the Trump administration might ultimately disassemble much of Dodd-Frank. Bits and pieces have been toned down so far, but the regulation remains mostly intact. Well, it seems like it is going to remain that way. SEC chief Jay Clayton just confirmed that while the SEC may seek to modify Dodd-Frank around the edges, there won’t be major changes. “I don’t think Dodd-Frank is changing a great deal, just to put a pin in it”, said Clayton.

FINSUM: Clearinghouses might see some changes, but otherwise Clayton seems fairly adamant that Dodd-Frank is staying put.

(New York)

In what could be a big gain for banks, US regulators are poised to roll back parts of the dreaded Volcker rule, or the Dodd-Frank regulation that virtually ended proprietary trading on Wall Street. One of the big points of loosening is that it will no longer be assumed that if a position is held for less than 60 days that it is a violation of the rule. Banks will also be able to demonstrate that they are market-making rather than proprietary trading much more simply.

FINSUM: Banks have long complained that the Volcker Rule meant they could not provide as much fixed income liquidity to markets as they once did. That should change now, theoretically.