Top strategist throws a (yield) curve at bank stocks
Dick Bove: An inverted yield curve doesn’t mean bank earnings will fall
Odeon Capital Group financial strategist Richard Bove on the inverted yield curve and why investors should watch bank stocks.
Odeon Capital Group financial strategist Richard Bove declaring bank stocks look “excellent” and an inverted yield won’t eat into their earnings.
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“History would argue that an inverted yield curve does not result in bank earnings going down,” he told FOX Business’ Liz Claman Wednesday on “The Claman Countdown.”
Today, the Dow Jones industrial average suffered an 800 point loss after a section of the yield curve inverted.
A yield curve inversion occurs when short-term bond yields rise above short-term bond yields. Today, the 10-Treasury yield fell below the 2-year note, while the 30-year Treasury yield dropped to a record low of 2.06 percent.
“Today the banks look excellent, the financial condition is extraordinarily strong, business is really good. We’re seeing an increase in loans to businesses. We’re seeing people buying cars again. We’re seeing an increase in mortgage activity. We’re seeing all of the areas that banks lend money into doing a bit better. Their margins are stable,” he said.
Bove explained why lower rates aren’t necessarily correlated to poor bank earnings.
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“From 2010 to 2015 we had the lowest recorded rates in the history of the United States. Bank earning went up every year except one and they hit all-time records in three years. From 1938 to 1950 the second period of lowest recorded rates bank earnings went up in nine of the 13 years and that’s through a recession and a world war.”
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