As we begin another quarter of U.S. earnings, U.S. financials kick us off and central to the discussion is less their previous results, and more their outlook for the days ahead.
That, as investors grapple with the idea of the “Trump dump,” or “Trump reflation” trading themes.
The latter, being the reflation theme is the one that was obviously beneficial for financials since the U.S. election.
When they are tracked as an index, financials are up three and a half times more the S&P 500, or 23% since the beginning of November.
That said, JP Morgan, the largest U.S. bank by assets, is like the majority of its peers reporting stronger than anticipated earnings – the result of surging investor activity from the beginning of November.
Obviously it’s the reflation trade that’s a better story for bank earnings, though with higher interest rates it means wider margins, and that’s the same story for Canadian banks such as TD with strong U.S. exposure.