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Language Notification

Please be advised that future verbal and written communications from the bank may be in English only. These communications may include, but are not limited to, account agreements, statements and disclosures, changes in terms or fees; or any servicing of your account.

Por favor, tenga en cuenta que es posible que las comunicaciones futuras del banco, ya sean verbales o escritas, sean únicamente en inglés. Estas comunicaciones podrían incluir, entre otras, contratos de cuentas, estados de cuenta y divulgaciones, así como cambios en términos o cargos o cualquier tipo de servicio para su cuenta.

Informamos que as futuras comunicações do banco, verbais e escritas, podem estar disponíveis apenas em inglês. Essas comunicações podem incluir, entre outras, acordos de conta, extratos de conta e divulgações, alterações aos termos ou tarifas, ou qualquer tipo de serviço pertinente à sua conta.

仅此通知,本行即日起发出的口头及书面通信可能将只提供英文版本。这些通信可能包括但不限于账户协议,账单和通知,条款或费用变更;或任何为您账户提供的服务。

Please be advised that future verbal and written communications from the bank may be in English only. These communications may include, but are not limited to, account agreements, statements and disclosures, changes in terms or fees; or any servicing of your account.

Por favor, tenga en cuenta que es posible que las comunicaciones futuras del banco, ya sean verbales o escritas, sean únicamente en inglés. Estas comunicaciones podrían incluir, entre otras, contratos de cuentas, estados de cuenta y divulgaciones, así como cambios en términos o cargos o cualquier tipo de servicio para su cuenta.

Informamos que as futuras comunicações do banco, verbais e escritas, podem estar disponíveis apenas em inglês. Essas comunicações podem incluir, entre outras, acordos de conta, extratos de conta e divulgações, alterações aos termos ou tarifas, ou qualquer tipo de serviço pertinente à sua conta.

仅此通知,本行即日起发出的口头及书面通信可能将只提供英文版本。这些通信可能包括但不限于账户协议,账单和通知,条款或费用变更;或任何为您账户提供的服务。

Tactical-View-on-Banks-Some-Further-Room-To-Run

Perspectives

Tactical view on banks – Some further room to run

Wietse Nijenhuis

By Wietse Nijenhuis

Equity Client Portfolio Manager

October 16, 2019Posted InEquities and Investment Strategy

Out of 24 S&P 500 industry groups, banks were the second best performers during September, returning 7.5% as the S&P returned 1.9%. However, banks started October on the back foot, retracing roughly half of September’s gains as worries over recession resurfaced amid softer survey based data. Recent weakness could provide an opportunity to revisit the sector. Two main factors support our view that banks can outperform on a tactical horizon (3-6 months): the pricing out of imminent recession fears and further yield curve steepening.

 

Despite weakening ISM data, we do not believe a US recession is imminent. Weakness in manufacturing is a global phenomenon, largely as a result of trade uncertainty. While this is weighing on the non-manufacturing parts of the economy, we do not believe it to be sufficient to pull the services sector into contraction. If the market adopts the view that a recession can be pushed further out, banks should be a prime beneficiary. A broadening out of the recently announced ‘Phase 1’ trade deal between the US and China would clearly help.

Linked to this is the shape of the yield curve. Banks’ outperformance in September came as the 3m10y curve steepened from -50 bps to -16bps. We expect this steepening has further to go. Indeed, on the back of the recent tumult in short-term funding markets, the Fed announced that it will begin to purchase T-bills in an effort to increase reserves in the banking system, driving a rally in shorter-dated Treasuries.  Before the financial crisis, the Fed held over a third of its portfolio in Treasury bills, and Fed leaders appear biased towards shortening the average maturity of the central bank’s Treasury holdings going forward. Coupled with our view that the Fed will ease further in the months ahead, we expect that a shift towards adding T-bills at the expense of longer-dated Treasuries in the Fed’s balance sheet will drive the yield curve steeper from here. The figures within this note show that banks benefit from a steeper curve.

 

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