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  • Writer's pictureRaymond Kanyo, CFA

MarketBites: Bank Earnings Disappoint, 0.75% rate hike likely


Portfolio Manager Commentary:

Stocks continued to decline Wednesday but recovered some ground by market close.

The selloff was most likely driven by lackluster earnings from JPMorgan and Morgan Stanley. JPMorgan announced a temporary halt to share buybacks, while Morgan Stanley highlighted a plunge in investment banking activity. Despite the weak earnings from these two bank giants, both bank chiefs sounded optimistic about the U.S. economy. In their view, a mild recession is more likely than a severe one.

Another source of "positive" news came from the Federal Reserve. Two Fed governors came out in support of a 0.75% rate hike at the next Fed meeting in two weeks. The remarks helped ease investors' fears of a full 1% hike.

Elsewhere, Bitcoin rallied as the crypto market is desperately trying to find its footing amid a wave of bankruptcies, liquidations, margin calls, and losses. In Europe, Italian equities sank as Prime Minister Mario Draghi offered to resign following a split in his coalition. However, the government refused the action.

Chart of the Day:

Warren Buffett famously said, "be greedy when others are fearful." According to this chart from Bloomberg, retail investors are finally starting to capitulate. For our clients at Avidus, we don't time the market, as we can't point to anyone with a spectacular track record who made his money timing the market. That being said, we do get a little excited when sentiment is low and investors start trading with their emotions, as oftentimes emotions create opportunities for the disciplined investor.

Source: Bloomberg Research

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