Will The Market Rally On Bad News From Banks?

From Bloomberg:

The six largest U.S. lenders, including JPMorgan Chase & Co. (JPM) and Wells Fargo & Co., may post an 11 percent drop in first-quarter profit, threatening a rally that pushed bank stocks 19 percent higher this year.

The banks will post $15.3 billion in net income when adjusted for one-time items, down from $17.3 billion in last year’s first quarter, according to a Bloomberg survey of analysts. Trading revenue at the biggest lenders is projected to fall 23 percent to $18.3 billion, according to Morgan Stanley analysts, who didn’t include their firm or Wells Fargo.

You can’t expect bank stocks to go straight to the moon,” said Peter Kovalski, a money manager at Alpine Woods Capital Investors LLC in Purchase, New York, which manages about $5 billion. “You have to expect fundamentals to catch up, and there are some headwinds facing the industry. There is a little too much optimism going into this quarter.”

U.S. lenders, struggling to expand in commercial banking years after the housing collapse, haven’t matched last year’s overall results, even as bond and equity markets strengthened. Making matters worse, loan balances increased less than the economy, bucking a trend in previous recoveries, said Brian Foran, a New York-based analyst at Nomura Holdings Inc.
My view:

Can we realistically expect this long bull run in the stock market (after the beginning of QE1, QE2 & Operation Twist) to continue if bank earnings begin to deteriorate?

Perhaps we could interview some Keynesian professors to see what they think?

Yes, I know the answer - let's fix a sovereign debt problem with even more debt!  Our evidence - look how well it's working in Europe!


  1. But, i don't agree with you, in some countries such happening don't occur, US economy is dont stable this time, but in some Asian Countries the development is at hike and many people are investing their money in market.

  2. Thank you for your comments Share Tips.
    I hope to post some further evidence for the shrinking banking profit problem in the next day or two.
    While some Asian markets are indeed doing quite well, consider that most of the major ones are well below their 2010 highs.
    My view - bear markets ahead of us.


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