The Focus This Week: Banking On The Quarter’s Performance
It’s earnings season (again) and time to find out whether the big banks have continued to bring in the big bucks. Heavyweights JPMorgan, Citigroup, Wells Fargo, Goldman Sachs, and BlackRock will open their books on Wednesday, with Bank of America and Morgan Stanley following suit a day later. Investors have, ahem, vaulted expectations: S&P 500 earnings overall are expected to rise 11.9% compared to the same time last year, which would mark the fastest growth since late 2021.
Now, a lot of people consider these banks’ releases to be the official start of earnings season, and this time around, they’re expected to steal the spotlight. After a standout 2024 where financials stocks jumped 28% – beating the S&P 500’s 23% return – investors are betting on a 40% earnings leap for the sector in the fourth quarter. And sure, the previous year’s low base for banks is likely to help the numbers along, but that’s far from the only thing driving the optimism.
See, banks thrive in a high-rate world. Their “net interest margins” – the difference between what they charge customers for loans versus the amount they pay on their own borrowing – are juiciest when rates are high. That’s the setup they’ve got now, and it’s likely to stick around. Throw in an expected rebound in dealmaking and initial public offerings, a potentially looser regulatory environment, some tantalizingly low valuations, and the fact that financial stocks remain surprisingly under-owned, and banks might just be 2025’s investing dark horse. That’s assuming, of course, that the economy stays on track and sentiment doesn’t sour.
On The Calendar
- Monday: Nothing major.
- Tuesday: US PPI (December).
- Wednesday: US inflation (December), UK inflation (December), France inflation (December), eurozone industrial production (November). Earnings: Citigroup, BlackRock, Goldman Sachs, JPMorgan, Wells Fargo.
- Thursday: Italy inflation (December), Germany inflation (December), UK economic growth (November), US retail sales (December). Earnings: Bank of America, Morgan Stanley, TSMC, UnitedHealth.
- Friday: China economic growth (Q4), China industrial production (December), China fixed assets investments (December), China retail sales (December), UK retail sales (December), US industrial production (December), US housing starts and permits (December).
What You Might’ve Missed Last Week
Global
- Global bond markets took a beating and yields soared to key levels.
- Bitcoin fell below $100,000, dragged lower by rising bond yields and market jitters.
US
- The US economy flexed its muscles again, creating way more jobs than anyone expected in December.
Asia
- China broke out even more new stimulus, but not enough to ease investors’ fears.
Why It Matters
Sticky inflation, political drama, and sky-high government debt continued to rattle markets last week, sparking a bond selloff that sent yields surging. US Treasury yields popped to near 5%, and…
Read More: Bank earnings and the investing week ahead
