Hey Friends... I'm so excited to be a part of the Traderade Family! To kick things off for earnings season tomorrow, I just wanted to put a few thoughts out on what we may see for the financial sector.
The official start of earnings season for me is usually the JP Morgan reporting. They report tomorrow before market open.
Last quarter, Jamie Dimon didn't seem to be in a very good mood. He had a some harsh things to say about the economy and his takes since then haven't been all too comforting.
"I cannot foresee any scenario at all where you're not going to have a lot of volatility in markets going forward. We've already spoken about the enormous strength of the economy, QT, inflation, war, commodity prices, there's almost no chance that you want to have volatile markets. That could be good or bad for trading, but some of -- no change won't happen. And I think people should be prepared for that." - Jamie Dimon, April 2022
The earnings results and calls from the Financial Sector are really important, whether you invest in them or not. Banks are a bellwether for the economy and the insights we get from them are priceless.
Here's what I see coming from the financials sector this earnings season:
Given that longer term yields have been rising, the commercial banks (who have more lending on their books) should report a higher net interest income. However, we may see a decrease in the origination of loans - particularly mortgage and car loans.
We’ve seen personal savings come down so, I won’t be surprised if deposits also reduce.
Credit card companies will see a rise in borrowing but also and increase in delinquency rates. $DFS $SYF $COF
We might also see more defaults from smaller businesses
Overdrafts may increase with personal borrowing
There may be some scope for income from mergers and acquisitions - i.e., capital markets, but we will have to see how the deals have panned out. IPOs have certainly reduced and a large portion of fees comes from stock issuances.
Last time trading accounts blew up because of the bond rout and volatility in commodities - the volatility did not decrease. But, it’s still been quite a ride over the last 3 months.
While $JPM has resolved their issues with the nickel fiasco we still need to see the lasting impact it may have on the results.
We will have a tough season ahead of us with rates increasing and liquidity decreasing, not to mention costs still being high.
Let's stay sharp and navigate this season together!