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When To Buy Banks

Many major financials institutions are set to report earnings Friday and next week. While many are expecting upside beats I believe the real positivity will come from forward guidance. The market wants quick results from these firms and expects that with the recent uptick in interest rates banks will be able to quickly reap profits. Expectations are high meaning soft earnings could provide a dip large enough to justify opening a position.


The move would of course depend on the guidance that the firm puts forward. If the guidance is strong, but current earnings are bad, short-sighted investors may sell. It is a fairly simple formula, to maintain a long investment horizon when others act on more short term results. We are in a strengthening interest rate environment and rates by nature require slow and steady movements for healthy expansion. Capitalizing on the opportunity brought about by missed earnings is the perfect way to gain exposure to increasing rates at a relatively cheap price.

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