WASHINGTON (AP) – Global stock markets have been turbulent and fairly scary this year. Following a rally this week, the U.S. market is down about 4 percent since the start of the year. Bank stocks have been hit especially hard. One of the prominent developments in the mix is the historic interest-rate hike by the Federal Reserve in December.
Frederick Cannon, global director of research and chief equity strategist at Keefe, Bruyette & Woods, sees both good and bad news for banks in the current environment and some potential bright spots for investors. The Q&A has been edited for clarity and length.
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Q: What about the impact of the Fed’s interest-rate increase, the first in nearly a decade?
A: For the banking system, the Fed rate rise may have been “be careful what you ask for.” Banks had been looking forward to the Fed raising interest rates and being able to get a better spread on their loans. (The difference between the interest rate a bank pays on money it borrows and the usually higher rate it charges its borrowers.)