Health of 'mega banks' is aiding U.S. economic resilience - Fidelity

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“Why has the economy remained resilient?,” Fidelity’s global macro director asked in a report earlier this week. One major driver: the health of U.S. mega banks, he said. Fidelity’s Jurrien Timmer in...

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One major driver: the health of U.S. mega banks, he said.  Fidelity’s Jurrien Timmer in...</p>\n\n<a href=\"https://seekingalpha.com/news/4104565-banks-economy-fed-kbe-rates-deposits-yield-gdp-mega-fidelity\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"LU2552382215.SGD","symbol_name":"WELLINGTON US BRAND POWER \"A\" (SGDHDG) ACC","start_time":0,"source_url":"https://seekingalpha.com/news/4104565-banks-economy-fed-kbe-rates-deposits-yield-gdp-mega-fidelity","article_id":"2434876489","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/628161012/image_628161012.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2434876489","pubTimestamp":1715443200,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"“Why has the economy remained resilient?,” Fidelity’s global macro director asked in a report earlier this week. 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One major driver: the health of U.S. mega banks, he said.  Fidelity’s Jurrien Timmer in a weekly asset allocation review highlighted, among other things, the April jobs report as continuing the soft-landing narrative in markets. Investors are watching to see if the Federal Reserve’s rate hikes can slow the economy to ease inflation without driving the country into a recession.  “There are several reasons,” for the economy’s resilience, ”but perhaps we just need to look at the health of the mega banks (NYSEARCA:KBE) as exhibit A,” Timmer said. “Bank deposits continue to recover from the mini-banking crisis 15 months ago, despite banks paying only a 0.5% average deposit rate to its customers.”  Bank deposits across the country grew by $47B, or 0.5%, in Q4 2023, the first increase in seven quarters, according to the Federal Deposit Insurance Corp. The banking industry was rocked in 2023 by the failure of three regional banks, including Silicon Valley Bank following a massive run on deposits by account holders. Industrywide deposit outflows were also stoked by customers seeking investments offering much higher yields than bank-deposit rates following rate hikes. Meanwhile, the economy not tilted into recession even though yield curve inversion (US10Y)(US2Y) has been warning of one.  “An inverted yield curve is usually a red flag because it signals that banks will stop lending (since they borrow short and lend long),” Timmer said. “But if the big banks fund their loans with deposits that only pay 0.5%, for them the yield curve is as steep as it ever gets,” he said, illustrating his point with a chart:   Timmer said those savings are likely not passed onto borrowers. A “low cost of capital for the mega banks could be one factor in explaining the economy’s resilience in the face of a steeply inverted yield curve.”  He also said there’s “plenty” of liquidity in the system despite the Fed knocking off $1.5 trillion in assets from its balance sheet through quantitative tightening, and raising interest rates by 525 basis points. “Bank reserves are holding in at $3.4 trillion”, he said, and the central bank will begin tapering the rate of its balance-sheet reduction in June, to $60 billion a month from $95 billion a month.  JPMorgan Chase (JPM), Bank of America (BAC), Wells Fargo (WFC), and Citigroup (C) are among the country's biggest banks. Among bank and financial ETFs, there are: (KBWB) (XLF) (FTXO).","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.1","shortVersion":"4.29.1","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2434876489"}