After what can only be described as a stellar year, JPMorgan’s stock may be in trouble. CNBC reports:
The Federal Reserve’s plan to methodically raise short-term interest rates over the next couple years may not boost bank shares, contrary to popular belief, and could instead hurt the group’s profitability as it flattens the so-called yield curve, Deutsche Bank said. Analyst Matt O’Connor downgraded shares of JPMorgan and regional bank PNC Financial late Monday to hold from buy for this reason. The yield curve is the difference between short term and long-term rates in the Treasury market and often runs parallel to the margin banks make on their loans.
The call resulted in a dip in premarket shares according to CNBC.
O’Connor also attributes JPMorgan’s coming decline to increased competition in investment banking. The other major banks have begun to mount a come back which has investors excited according to the analyst, meaning they will likely profit from JPMorgan’s loss.
If Deutsche’s call is correct, diversifying your portfolio to include the other banks such as Morgan Stanley or Wells Fargo could be profitable. As always, assess your financial position and take action accordingly.
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