Investors Reassess Banking Stocks amid Trump Trade Volatility



Rising concerns

The S&P 500 Index (SPX-INDEX) (SPY) fell 1.8% on May 17, 2017, as reports came out that President Donald Trump had tried to persuade former FBI director James Comey to drop a probe on former national security adviser Michael Flynn.

The news raised concerns about a prolonged market correction considering the potential of weaker implementation of corporate and tax reforms by the Trump administration. Commercial banking (XLF) stocks fell 3.2% on May 17, reflecting a potentially major impact if Trump’s targeted policies don’t materialize. Overall, investors have shifted toward treasuries, with gold eyeing a possible turnaround on the horizon.

Investors are weighing out the potential fallout of these political missteps and how they’ll transfer to financial markets. Credit lending, asset quality, and earnings expectations could be negatively affected.

Article continues below advertisement

Banking stocks

Major banks JPMorgan Chase (JPM), Bank of America (BAC), Citigroup (C), and Wells Fargo (WFC) fell 3%, 5.8%, 1.7%, and 1.4%, respectively, on May 17, 2017. The falls reflected concerns about banking, tax, and other corporate reforms impacting credit offtake and interest rates.

Asset managers BlackRock (BLK), Blackstone (BX), and State Street (STT) fell 0.23%, 1.9%, and 3.5%, respectively, on the same day. Global markets’ rising streak seems to have halted, at least for now. Whether this will continue for a prolonged period depends largely on how the Trump administration directs its course going forward.

Coming up, we’ll study how the banking space is expected to perform amid the possible reversal of Trump trade and what to expect at macroeconomic and fundamental levels.


More From Market Realist