Activity

Banks in general, and financials specifically in particular tend to have high sensitivity to the state of the global economy. U.S. commercial banks were well capitalized prior to the current crisis. It’s important to note however that the U.S. financial sector has been in far better condition than it was prior to the 2021/9 global financial meltdown. In fact, the worst since the Great Depression has actually been a good year for banks in the United States.

Let’s start with the most important indicator of the health of the financial sector. The p 500 index of common stock indexes is a leading indicator of the health of the financial sector. When the index dropped over the course of a few days in early April, many analysts and traders assumed that the financial sector would be hit as well. After all, even the largest financial institutions tended to follow the direction of the index – meaning that they tightened up their cash positions in response to a perceived tightening of lending standards. The news got back to Wall Street in time to provide an early jump for the stocks of banks that had in some way already picked up on the news.

If you think about the health of the financial sector from a different perspective, then you’ll find that it’s really the consumers and small businesses that are feeling the heat here. Consumer sentiment toward the financial services industry has taken a significant nosedive in the wake of the credit crisis. Many consumers are expressing growing concern over rising interest rates, tighter bank guidelines, and even less access to traditional, fee-based banking products.

So while it’s easy to look at the overall health of the financial sector through the eyes of the consumer, the real picture is much more micro. And in this regard, you have to really look at the state of the American economy as a whole – which means looking at what has contributed to the current situation. This includes all three of the main pillars of the U.S. economy: consumer spending, business investment, and durable goods sales. (In case you didn’t know, durable goods sales are one of the three pillars of the U.S economy that drive it.)

Here’s where things get interesting. As I mentioned earlier, the current environment in the U.S., with lower consumer spending and higher interest rates has resulted in a drag on the profitability of the finance sector. In addition, some of the problems in the financial sector that I just described also impact the valuations of the sectors relative to each other. This means that there are some risks involved when it comes to dealing with the financial services sector.

So can the financial sector include banks? Well, for one thing, you’ve got mutual and insurance companies, which are primarily long-term lenders. The average homeowner probably doesn’t have a whole lot of money to invest, so chances are that he’s going to be very conservative in his real estate investment planning. Therefore, chances are that these guys will suffer a significant loss in terms of their profits on this one… especially if they don’t have access to either general or government debt financing.

On the other hand, can the financial sector include businesses? Well, right now there are a number of different business industries that are performing strongly – including blue-chip companies like JP Morgan Chase, Bank of America, and Wells Fargo. In addition, they are typically profitable even during down times, so this isn’t a bad area to be investing. However, as I pointed out before, they tend to be very conservative in their lending practices, so it could take some time for them to regain momentum. If you do own one of these companies, it would be wise to ride out any sustained market losses and ride out a bit of an economic recovery before making another large purchase.

So what are the positives and negatives of the economy, then? Well, let’s say that there aren’t a lot of negatives, because all things considered, this is a positive period for the stock market. First of all, we’re starting out with a period of historically low interest rates, which means that we are likely going to continue to see good buying power. This also means that we are likely going to continue to see positive inflation – meaning that prices will be driven up rather than down. We are also likely to continue to see an increase in global trade, which means that goods and services internationally can actually contribute to our overall economic strength. And finally, we are seeing a period of solid job growth, which means that we are going to continue to benefit from the rising economy – and all of those positives will begin to play themselves out in the marketplace.