Saturday, September 8, 2018

Still Bullish On Financials, Less So On Tech

Clients know we continue to like financials right here. Despite their thus far lackluster 2018 results, the macro environment (save for one huge elephant [trade war] in the room) -- as well as the sector's own fundamentals -- screams in their favor. 

Here's support for our thesis from this week's issue of the Economist:
Genuinely strong results from resurgent American banks, especially Morgan Stanley, suggest decent returns have become feasible. Jamie Dimon, chief executive of JPMorgan Chase, has gone so far as to say that a “golden age” of banking beckons. Profits are beginning to improve, economies are expanding, credit quality is good, regulation is ebbing.
Even Europe’s banks, so slow to put the crisis behind them, are finally looking to the future. In August Jes Staley, the boss of Barclays, reported one of the bank’s “first clean quarters” in years, free of write-downs and fines. 
Clients also know that, while not outright bearish, we're currently less sanguine about tech. Here's a quip from the same article that speaks to our general thesis:    emphasis ours...
....banks have become more cost-conscious. There have been cuts in staff across the board; at Bank of America by a third, at Citigroup by 44%, and at Barclays by half. If you want in-house baristas, go to the Bay Area tech giants...

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