On 13th of January, the first of the major US financial institutions begin announcing their fourth quarter earnings results. Bank of America, JP Morgan and Wells Fargo will be the key results to watch.
The rise in US financials has been significant by any measure; multiples have expanded ahead of what investors are hoping to be record levels of profit and bullish forward guidance. The US financial sector has been boosted by the expectation of higher interest rates, deregulation and high trading earnings to drive profits.
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However, we have concerns: economic growth in the US is not that strong, the year-over-year GDP growth rate was only 1.7 percent in the third quarter, S&P500 average year on year EPS growth was only +4% in the third quarter and it’s had to see growth improve dramatically in 2017, especially with a stronger US dollar.
