Quarterly Outlook
Q4 Outlook for Investors: Diversify like it’s 2025 – don’t fall for déjà vu
Jacob Falkencrone
Global Head of Investment Strategy
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London Quick Take – 17 Oct - US regional bank worries send stocks lower, gold breaks above $4,300/oz
Neil Wilson
Investor Content Strategist
Note: This is marketing material. This article is not investment advice, capital is at risk.
How did we get here? The S&P 500 started the day positive on Thursday but ended 0.63% lower as news spread about losses at a couple of regional lenders, Zions Bancorp and Western Alliance. These are just $7bn market cap banks – relative minnows - but it seems to have rekindled some of the SVB-Credit Suisse memories from 2023. Investment bank Jefferies, a much bigger fish, also tanked as Wall Street raised concerns about soured loans. Small caps bore the brunt with the Russell 2k down 2% after hitting a record high.
Cockroaches: “When you see one cockroach, there are probably more,” JPMorgan CEO Jamie Dimon said on the bank’s earnings call this week. He was talking about bad loans and concerns about the private credit market following the collapse of subprime auto lender Tricolor and car parts supplier First Brands. JPM took a $170mn hit from the Tricolor collapse. Jefferies, which fell 10% yesterday, said hedge funds it runs are owed $715 million from companies tied to First Brands. UBS has about $500 million in exposure. Zions plunged 13% on a $50m charge-off...hardly a giant black hole.
All these could be isolated incidents, but there are increasing concerns about souring loans and bad credit. What I think is that this is hardly a massive deal, but it seems like any excuse to sell on a Friday because everyone knows the market is toppy. Regional banking crises (is it one?) always make me think of It's A Wonderful Life, but I don't think this Friday will need George Bailey to clear out his honeymoon funds to get depositors through the weekend without closing the Building and Loan company...but futures are pointing south on Wall Street and the market is ripe for a correction at these level.
Meanwhile ... gold keeps on running without a breather, now spot taking out $4,300, whilst Bitcoin is taking a hammering from the risk-off liquidation...digital gold my foot, now down 15% from its peak just over a week ago. Finally, Trump will meet Putin again in the next couple of weeks as he looks to add another peace deal to his name.
Key Points
- Wall Street slides as regional bank stocks plunge on bad loan fears
- European bank stocks taking a hit
- Gold makes fresh record high above $4,300/oz as Bitcoin tumbles
- Trump to meet Putin in Budapest
Friday sell-off, bad credit edition: Worries about regional banks in the US has sent a shiver through markets this morning with the FTSE 100 selling off sharply. Financials, which make up about a quarter of the blue-chip index by weight, skidded 2-4% lower amid credit quality issues bubbling up in the US, sending the index down 1.65% to around 9,280. That would be its biggest daily decline since April. Bank stocks across Europe declined 2.8% in early trading on Friday. Barclays fell over 5% with Standard Chartered close behind at 4.9% lower, while the alternative asset manager Icg was the hardest hit down almost 7%.
Add worries about trade wars (last week's edition) and the ever-growing bubble risk from AI and you have a pretty nasty little cocktail of excuses to end the week in risk-off mode. We've been so used to up days the down days feel all the tougher and stranger. US futures are indicating a sharply lower open.
Add worries about trade wars (last week's edition) and the ever-growing bubble risk from AI and you have a pretty nasty little cocktail of excuses to end the week in risk-off mode. We've been so used to up days the down days feel all the tougher and stranger. US futures are indicating a sharply lower open.
How did we get here? The S&P 500 started the day positive on Thursday but ended 0.63% lower as news spread about losses at a couple of regional lenders, Zions Bancorp and Western Alliance. These are just $7bn market cap banks – relative minnows - but it seems to have rekindled some of the SVB-Credit Suisse memories from 2023. Investment bank Jefferies, a much bigger fish, also tanked as Wall Street raised concerns about soured loans. Small caps bore the brunt with the Russell 2k down 2% after hitting a record high.
Cockroaches: “When you see one cockroach, there are probably more,” JPMorgan CEO Jamie Dimon said on the bank’s earnings call this week. He was talking about bad loans and concerns about the private credit market following the collapse of subprime auto lender Tricolor and car parts supplier First Brands. JPM took a $170mn hit from the Tricolor collapse. Jefferies, which fell 10% yesterday, said hedge funds it runs are owed $715 million from companies tied to First Brands. UBS has about $500 million in exposure. Zions plunged 13% on a $50m charge-off...hardly a giant black hole.
All these could be isolated incidents, but there are increasing concerns about souring loans and bad credit. What I think is that this is hardly a massive deal, but it seems like any excuse to sell on a Friday because everyone knows the market is toppy. Regional banking crises (is it one?) always make me think of It's A Wonderful Life, but I don't think this Friday will need George Bailey to clear out his honeymoon funds to get depositors through the weekend without closing the Building and Loan company...but futures are pointing south on Wall Street and the market is ripe for a correction at these level.
Meanwhile ... gold keeps on running without a breather, now spot taking out $4,300, whilst Bitcoin is taking a hammering from the risk-off liquidation...digital gold my foot, now down 15% from its peak just over a week ago. Finally, Trump will meet Putin again in the next couple of weeks as he looks to add another peace deal to his name.
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