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Turnover on Wall Street due to the ‘Powell effect’. Is there an opportunity in the banks?

The move in Treasuries has sent investors fleeing lower quality and growth tech stocks, while boosting bank stocks. The Nasdaq falls, in fact, 1.8% since the news broke of the continuity of a Republican like Jerome Powell as head of the US central bank for the next four years. The only change was the election of Governor Lael Brainard as Vice President replacing Richard Clarida.

“US 2-year – 10-year bonds raise their IRRs as the Fed will accelerate tapering. Lt. Governor Brainard replacing Clarida, who this weekend said the Fed could decide to accelerate its tapering at the December 15 meeting. So the conclusion about the consequences of these changes is unclear. It is not known for sure whether they are somewhat more hawkish or dovish, but the market fears that a renowned Powell will become more hawkish, ”Bankinter analysts point out.

The truth is that investors take advantage of each market movement to unload positions and rebalance portfolios from securities with more demanding valuations to stocks that may have a path if monetary policy is normalized with a greater reduction in asset purchases and an eventual rate hike in the summer of 2022, like banks.

The US economy, likewise, presented positive employment data this Wednesday and inflation that is beginning to be sustained above 2%, which is the Federal Reserve’s objective. The weekly number of applications for unemployment benefits in the United States fell to 199,000 last week, compared with 270,000 the previous week, the Bureau of Labor Statistics (BLS) reported today. It is the first time that the number of these procedures is below 200,000 in a week since before the COVID-19 pandemic affected the US labor market.

The gross domestic product (GDP) of the United States in the third quarter experienced an increase of 0.5% compared to the previous three months, due to the new rebound of the pandemic in the country, according to the second estimate of the data published by the Government Economic Analysis Office, which thus maintains the data advanced last month.

For its part, the price index for personal consumption expenses (PCE) increased by 5.3%, unchanged from the previous estimate. Excluding food and energy prices, the core PCE price index increased 4.5%, also unchanged.

This Tuesday, the values ​​that increased the most in the Dow Jones were those of Goldman Sachs that revalued 2.57% and JP Morgan 2.39%. Is there potential in US banking? The Reuters consensus analysts advise buying the shares of major US banks, JP Morgan, Bank of America, Citigroup, Wells Fargo and Goldman Sachs. The bank that analysts give the most potential for increases is Citigroup with 26% to $ 84.96 per share, followed by 13.7% by Goldman Sachs and 5.4% by JP Morgan.

In any case, US banks are closer to improving their net interest income again than European banks, although their business model is not entirely the same. Wall Street banks benefit from other activities to a greater extent than the banks of the Old Continent that are more linked to granting loans and mortgages compared to a bank more linked to investment, to placements on the stock market …

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