Making sense of the markets this week: January 21, 2024

The acquisition looks to be turning out quite well for America’s largest bank, as it claimed that the former First Republic Bank contributed $4.1 billion in profit in 2023.

Dimon provided some macroeconomic context in forward guidance. “The U.S. economy continues to be resilient, with consumers still spending, and markets currently expect a soft landing.” 

Of course, being a banking CEO, he then had to hedge his position by saying deficit spending “may lead inflation to be stickier and rates to be higher than markets expect.” 

New Morgan Stanley CEO Ted Pick cited two “major downside risks” as reasons for concern: geopolitical conflicts and the U.S. economy. 

Mirroring Dimon’s “on one hand, and on the other hand” PR formula, Pick stated, “The base case is benign, namely that of a soft landing. But, if the economy weakens dramatically in the quarters to come and the [U.S. Federal Reserve] has to move rapidly to avoid a hard landing, that would likely result in lower asset prices and activity levels.”

Like their Canadian banking brethren, the U.S. banks all reported substantial increased provisions for credit losses. This money, set aside to cover the inevitable increase in interest-led loan delinquencies, also weighs on banks’ bottom lines.

Canadians looking for exposure to U.S. banks can get it through TSX-listed ETFs, such as the Harvest US Bank Leaders Income ETF (HUBL), RBC U.S. Banks Yield Index ETF (RUBY) and BMO Equal Weight US Banks Index ETF (ZBK). Investors can also get single-stock exposure to JPMorgan, Bank of America and Goldman Sachs in Canadian dollars through Canadian Depository Receipts (CDRs) listed on the Cboe Canada Exchange.

Check MoneySense’s ETF screener for all ETF options in Canada.

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