Where are we in the banking cycle?

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Livewire Markets

Global banks have formed a cornerstone part of PM Capital’s strategy as they’ve taken the #1 ranking in their category in the Morningstar survey over five and eight years. Following the election of Donald Trump, the Nasdaq Global Bank Index is up over 15%. So, has all the easy money been made? Paul Moore, Chief Investment Officer of PM Capital, explains his view.

“People now accept the fact that were in a period where banks can start to grow their earnings… We’re now firmly in the third quarter”

Key points:

  • Trump has made people realise that higher growth and higher rates are on the cards
  • Banks are prime beneficiaries of Trump tax cuts. BofA could see earnings growth of 30%
  • Markets always underestimate how much earnings can grow once they enter an upgrade cycle
  • Dividend growth story is only starting to get on people’s minds
  • Higher US rates could impact the mortgage books of local banks
  • Recent buyers of property in Australia are overleveraged and markets are underestimating this risk

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