100s of titles, one news app for just $10 a month.
Dive Deeper:
Fed rate hikes are good for banks—unless they end in a recession
Higher rates are usually good news for bank shares, but not this year. ‘People are worried that the Fed will…
'Meme' and tech stocks are crashing, so how are experienced investors hanging on?
t's a perfect storm for the stock market this year: geopolitical turmoil, high inflation, and higher interest rates in 2022.
Stocks are way down. They are still expensive
The S&P 500 still has plenty of room to fall, if history is any guide
Stocks roar back at end of nerve-racking week: Markets wrap
Stocks rallied at the end of a chaotic week in financial markets, with a little help from Federal Reserve Chair…
One subscription that gives you access to news from hundreds of sites
Asian shares track technology-led sell-off on Wall Street
Shares have declined in Asia following the release of U.S. inflation data that was worse than expected
What's Going On With Rivian Stock Today?
Rivian Automotive Inc (NASDAQ: RIVN) shares are trading lower Wednesday alongside several companies in the broader consumer discretionary space amid overall market weakness…
Get all your news in one place
Latest Politics news:
Grattan on Friday: Stellar first week for Anthony Albanese but tough months ahead
Anthony Albanese had expected the election might be a week earlier than it was, because last Saturday would bump up…
Read news from The Economist, FT, Bloomberg and more, with one subscription
Learn More
‘Devastated’ Morrison reveals what’s next after stunning election defeat
Former prime minister Scott Morrison has spoken out following his brutal election defeat, saying he's "going back to being a…
Tech Central will be ‘world’s most inclusive’ precinct: Annie Parker
Tech Central boss Annie Parker has pledged to make the Sydney innovation precinct the most inclusive in the world and…
Why Denmark is voting on its defence relationship with the EU – and what it says about democracy in Europe
On June 1, voters in Denmark will take part in a referendum on whether to end the country’s opt-out from…
Alan Kohler: Here’s a crazy idea for the Liberal Party – sensible policies
If the Liberal Party goes to the right, whatever that means, it will be doomed and politics in Australia will…
From analysis to good news, read the world’s best news in one place
Will the latest shooting of US children finally lead to gun reform? Sadly, that's unlikely
Mass shootings in the United States are all too common and, sadly, unsurprising to much of the world.
Industry-led research is key to improved economic outcomes
In its short history, Australia has built a proud tradition of research excellence across our institutions. In mainstream commentary we…

Fed rate hikes are good for banks—unless they end in a recession

The Federal Reserve has raised rates twice since March in a bid to curb inflation and hinted that more increases are on the way. (Photo: Bloomberg)

JPMorgan Chase & Co., Goldman Sachs Group Inc., Bank of America Corp. and Morgan Stanley have slumped this year after two years of big pandemic gains. All four banks are off their 52-week highs by more than 20%, including a 28% drop at JPMorgan. That compares with a 14% drop in the S&P 500.

Higher rates are supposed to help bank stocks, but they haven’t this year. The Federal Reserve has raised rates twice since March in a bid to curb inflation and hinted that more increases are on the way.

But investors worry that rate increases that are too big or too fast could tip the economy into recession. Broader markets and big-bank stocks jumped Wednesday after the Fed said it would raise rates by half a point. They fell sharply Thursday and Friday as the realities of a more challenging economic environment set in.

“People are worried that the Fed will push until something breaks, which could lead to a recession and credit losses," said Citigroup analyst Keith Horowitz, who is mostly bullish on the banking sector and expects any potential credit losses to be manageable.

Higher rates can lead to billions of dollars in additional annual revenue for the banks because they allow banks to charge more on loans while paying depositors only modestly more. Banks can also earn more interest on cash that previously sat idle.

Analysts at KBW, a unit of Stifel Financial Corp., project net interest income will rise 18% at Bank of America and 17% at JPMorgan this year.

Still, investors are parsing disparate data about the financial health of consumers and businesses. The U.S. economy shrank by 1.4% in the first quarter, the worst showing since early in the pandemic, in spring 2020. However, consumer and business spending remained strong. Bank executives have pointed to high spending in categories like travel and entertainment as reasons for optimism.

Market volatility resulting from higher interest rates and the war in Ukraine have dinged big banks’ deal-making businesses. The market for initial public offerings has been largely shut down over the past several months.

Despite the selloffs, bank executives are striking an upbeat tone. “Bank stocks have been largely undervalued…relative to their potential," Morgan Stanley CEO James Gorman said last week/ at The Wall Street Journal’s CEO Council Summit.

Though Mr. Gorman said a mild recession in the near future wouldn’t surprise him, he added that economic uncertainty shouldn’t interfere with long-term decision making. “If you have good strategic things to invest in, whether it’s as a company, a portfolio manager, investor, you should be investing in them."

What is inkl?
The world’s most important news, from 100+ trusted global sources, in one place.
Morning Edition
Your daily
news overview

Morning Edition ensures you start your day well informed.

No paywalls, no clickbait, no ads
Enjoy beautiful reading

Content is only half the story. The world's best news experience is free from distraction: ad-free, clickbait-free, and beautifully designed.

Expert Curation
The news you need to know

Stories are ranked by proprietary algorithms based on importance and curated by real news journalists to ensure that you receive the most important stories as they break.

Dive Deeper:
Fed rate hikes are good for banks—unless they end in a recession
Higher rates are usually good news for bank shares, but not this year. ‘People are worried that the Fed will…
'Meme' and tech stocks are crashing, so how are experienced investors hanging on?
t's a perfect storm for the stock market this year: geopolitical turmoil, high inflation, and higher interest rates in 2022.
Stocks are way down. They are still expensive
The S&P 500 still has plenty of room to fall, if history is any guide
Stocks roar back at end of nerve-racking week: Markets wrap
Stocks rallied at the end of a chaotic week in financial markets, with a little help from Federal Reserve Chair…
One subscription that gives you access to news from hundreds of sites
Asian shares track technology-led sell-off on Wall Street
Shares have declined in Asia following the release of U.S. inflation data that was worse than expected
What's Going On With Rivian Stock Today?
Rivian Automotive Inc (NASDAQ: RIVN) shares are trading lower Wednesday alongside several companies in the broader consumer discretionary space amid overall market weakness…
Get all your news in one place