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The Institutional Risk Analyst

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Rates Rally Financials, But Credit Fears Remain

December 15, 2023 | 溢价| After the past week of market exuberance, we take a look at the banking, mortgage and fintech sectors to see who is on top in terms of the equity markets and who is not. Some of the results may surprise readers of The Institutional Risk Analyst, but that is not remarkable given that the 10-year Treasury has rallied to below 4% yield in a week. Basically, today we are back where the industry stood at the end of Q2 2023. The key term for risk managers and investors in 2024 remains unchanged from this year: Volatility.


Our basic view is that the global equity markets are way ahead of the FOMC and the US Treasury when it comes to long-term interest rates. Those optimistic souls at Goldman Sachs (GS) are telling clients that the first Fed rate cut will come in the first quarter of this year, but we think that the Boys of Broad Street may have the wrong year. With the US economy roaring along with no recession in sight, we suspect that Powell will err on the side of patience. Indeed, the inaction from the FOMC may allow Powell to return to a quarterly media event instead of the current monthly spectacle. 


Here are a few high level takeaways from the past week. 


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