Displaying items by tag: jp morgan

(New York)

Investors be warned, JP Morgan has just issued an ominous warning—that ten-year Treasury yields will jump to 5%. JP Morgan’s CEO, Jamie Dimon, has long argued that yields would rise to 4%, but now says the figure might be 5%. “I think rates should be 4 percent today … You better be prepared to deal with rates 5 percent or higher - it’s a higher probability than most people think”. Dimon sees a recession on the horizon, but he does admit there may be time for the bull market to continue, saying it could “actually go for 2 or 3 more years”.

FINSUM: Ten-year yields are currently having trouble sustaining 3%, so it is hard to imagine them going to 5% any time soon. Still we thought the warning was worth sharing.

(New York)

Investors look out, it is time to go on the defensive, at least according to JP Morgan. The top strategist at JPMorgan Asset & Wealth Management, Michael Cembalest, has just told investors that the growing trade war and its threat to markets and the economy means investors need to be very worried. Cembalest points out that this will be the first sustained rise in tariffs across the global economy in 50 years and it is a profound shift away from decades of historical precedent. If the US proceeds with a further $200 bn tariff package on top of its $34 bn package, then markets could be in for a wild ride, says JP Morgan. They advise to focus on consumer staples and tech stocks.

FINSUM: This is a pretty stark warning from JP Morgan and it does make sense. Because there is little recent precedent for trade war, the market may not be accurately pricing the threat it poses.

(New York)

US financial shares might be in for a quick ride higher. Bank of America’s earnings came in 33% higher than last year, leading to a blowout for the sector. The news followed strong earnings from JP Morgan and Citi. BAML’s shares rose over 4% on the news with one analyst commenting that the numbers were “almost all you could have hoped for”. Rising interest rates were a key factor in the increasing earnings, as banks earned more from net interest margins.

FINSUM: These are great numbers, but they may only be temporary. Consumers have not yet started demanding higher interest payments on savings, but once they do (and we think they will), then banks’ net interest margins will start shrinking again.

(New York)

JP Morgan has just put out a guide which may be very interesting to investors—a manual for how to navigate the end of easy money. The bank thinks the equity market’s response to earnings has been very worrisome lately, and they are very bearish. The bank recommends that in 2019, investors go underweight equities and long gold and long duration as the economic cycle ends and real rates “collapse”.

FINSUM: This is an extraordinarily bearish outlook from JP Morgan, and it seems mostly dictated by weakness in equity prices lately. Investors should take this warning seriously.

(New York)

There is some speculation that bank stocks may be set to go on a tear. Rising rates are usually good for banks. They cause bond volatility, which boosts trading income, and they boost net interest margins, which raises interest income. However, so far this year, things have been weak. Barron’s also adds a solid point—insiders are not buying bank stocks. It has been two years since Jamie Dimon bought his company’s stock, and BAML top brass have been notably absent too. That seems to reflect a lack of conviction on the part of management.

FINSUM: The lack of buying from management is a troubling sign for us, as they certainly have the best insight into the future of the company. It is odd though, as ostensibly things look very positive.