The US hedge-fund manager, Steve Eisman who is nowadays famous thanks to the movie “The Big Short,” (brought to the big screen in 2015) which exposed the causes of the financial crisis since 2007 through 2010, affirmed that there’s going to be a golden era for banks regarding the stock market.
Despite having bet against the risky mortgage products that were designed by some of the best banks in the world, and having practically declared that they would be a double-edged sword for the financial system, now, Eisman seizes a much less pessimistic position concerning the banking sector. Eisman also said that in the next years there will be a good opportunity to start investing.
Is it because of Trump’s victory that the golden year is coming?
Steve Eisman owes its predecessor to the recent victory of US president-elect, Donald Trump, with whom he says a difficulty will occur in some of the financial regulations; despite opponents of his plan insist on the new regulations could hinder the profitability of large lenders.
Eisman said on Monday for CNBC NY that over the next two years there will be more leverage, and that it’s going to be a golden age to invest in financial stocks. Regarding their statements, it is almost impossible to question them because of the rise in some of the investment banking and securities groups, as is the case of Goldman Sachs, whose shares increased 31% after the result of the presidential election in favor of Trump. Also, some of the most important market indices such as the S&P500 and the Nasdaq Composite COMP both have also recorded really good rebounds.
The “overweight” sectors
Despite Eisman’s predictions, Charles Schwab Corporation’s chief strategist and investor, Liz Ann Sonders, was on CNBC, and talked about eight years of “underperformance” for bank stocks during their market, this means that she’s sure that there is still a lot to discover and to invest in the financial sector, emphasizing that currently only two sectors are “overweight” or that stand out to buy and invest, which are the finance and the technology sectors.
However, the stock valuations of the banks are still modest in spite of their increase, so we shouldn’t claim victory yet. Its price-earnings relation indicates that finances are inexpensive compared to the stock market in general.
The financial forecast for 2017
Although Trump’s promises could largely benefit the banking sector, it’s necessary to wait and see if he will be able to extend those earnings over the upcoming year. We could still face the situation that Trump could not meet his plan to reduce corporate taxes and reduce the burden on large lenders
Plus, it has been informed that there may be loan losses, especially in the automotive sector, due to the rapid increase in interest rates.