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Coronavirus Induced Volatility to Aid Banks' Trading Business
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Coronavirus fears have led to an unexpected rise in volatility in the market. With a spike in volatility and higher client activities, banks’ trading businesses (both equity and fixed income) are likely to get a significant boost.
Over the past few weeks, all the major indexes – the S&P 500, Dow Jones and Nasdaq – witnessed a roller coaster ride, swinging from new highs to record lows. So far this year, all the three indexes have paredlast year’s gains and have lost more than 5%, with a major decline being witnessedover the past couple of weeks.
Further, due to such volatile market performance, investors are moving toward safe havens like Treasury bonds and other commodities like gold. Therefore, major Wall Street banks – JPMorgan (JPM - Free Report) , Bank of America (BAC - Free Report) , Citigroup (C - Free Report) , Morgan Stanley (MS - Free Report) and Goldman Sachs (GS - Free Report) – are expected to report improvement in both equity and fixed income trading revenues in the first quarter of 2020.
Trading revenues form a substantial part of these banks’ total revenues, ranging from more than 15% to almost 40%. Since fourth-quarter 2018, trading business had been dull with the trend gradually reversing in the second half of 2019. Now, with the virus induced volatility, we expect similar momentum to continue at least in the near term.
In fact, even before virus wreaked havoc on investor sentiments and led to heightened volatility, JPMorgan had projected “mid-teens” percentage growth in its trading revenues in the first quarter.With almost whole of March still before us and virus related scare not abating anytime soon, trading income is expected to continue rising.
Thus, for banks deriving substantial part of their total revenues from trading operations, this rise in market volatility and client activities is a boon. This will support revenues at the time when the Federal Reserve has lowered interest rates again, which will hurt banks’ net interest income and margins.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Image: Bigstock
Coronavirus Induced Volatility to Aid Banks' Trading Business
Coronavirus fears have led to an unexpected rise in volatility in the market. With a spike in volatility and higher client activities, banks’ trading businesses (both equity and fixed income) are likely to get a significant boost.
Over the past few weeks, all the major indexes – the S&P 500, Dow Jones and Nasdaq – witnessed a roller coaster ride, swinging from new highs to record lows. So far this year, all the three indexes have paredlast year’s gains and have lost more than 5%, with a major decline being witnessedover the past couple of weeks.
Further, due to such volatile market performance, investors are moving toward safe havens like Treasury bonds and other commodities like gold. Therefore, major Wall Street banks – JPMorgan (JPM - Free Report) , Bank of America (BAC - Free Report) , Citigroup (C - Free Report) , Morgan Stanley (MS - Free Report) and Goldman Sachs (GS - Free Report) – are expected to report improvement in both equity and fixed income trading revenues in the first quarter of 2020.
Trading revenues form a substantial part of these banks’ total revenues, ranging from more than 15% to almost 40%. Since fourth-quarter 2018, trading business had been dull with the trend gradually reversing in the second half of 2019. Now, with the virus induced volatility, we expect similar momentum to continue at least in the near term.
In fact, even before virus wreaked havoc on investor sentiments and led to heightened volatility, JPMorgan had projected “mid-teens” percentage growth in its trading revenues in the first quarter.With almost whole of March still before us and virus related scare not abating anytime soon, trading income is expected to continue rising.
Thus, for banks deriving substantial part of their total revenues from trading operations, this rise in market volatility and client activities is a boon. This will support revenues at the time when the Federal Reserve has lowered interest rates again, which will hurt banks’ net interest income and margins.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>