Alix Steel: Deutsche Bank underperforming all European peers as European equities, banks, also underperform U.S. banks. Keith, what bridges that gap, what’s your explanation for that?
Keith Lerner: Well I think the reason for the big underperformance is because the U.S. banks led us into the recession and out of the recession, and we’re still drying off a lot of debt within the European banks. But I will say what’s really interesting when you look at the European banks, while the U.S. banks are at cycle highs, European banks are only back to where they were in 2015.
Since this bull market started, U.S. banks are up 500 percent; European banks are up less than 100. So I think right now, I think what’s going on, we’re trying to find out how do we unlock value for these banks?
David Westin: So you’re a chief market strategist. As you look at it, does that mean there’s upside overall in Europe? Because obviously banking is very important to overall growth, particularly in Europe given the role of banks for corporations.
Lerner: Great point. In Europe the banks, or financials, are about 20 percent of indexes. In the U.S. it’s a little bit less. There’s a lot less technology in Europe. So yes, it is important. We’re bullish on financials broadly, because if ultimately rates will move higher, they’ve stepped back over the last month or two, and that actually from our perspective provides an opportunity.
Steel: And that brings us to earnings season, because we have JP Morgan and Citi reporting on Friday overall, we’re still looking at earnings season to deliver 17 percent profit growth. Do we meet that?
Lerner: I think we do. What’s unusual about this earnings period is during the quarter, earnings revisions have been going up. In fact, since the end of last year, forward estimates for the S&P are up 10 percent. What’s even more interesting as earnings have moved up and the prices have corrected, valuations on the global markets are at two-year lows.
Steel: But what’s interesting is that tech and industrial sector margins are supposed to expand. Tech had seen a lot -- excuse me, other sectors but tech had seen a lot of upgrades. What happens in a trade war, to earnings?
Lerner: Well, listen, we don’t know in totality now. But Iwant to tell you as far as ... Let’s try to put some of these numbers in perspective right now. We’re talking about $100-$150 billion of tariffs and that amounts to much less as far as taxes on those tariffs. If you think about the fiscal stimulus in the pipeline right now, it’s about $800 billion. So we think the fiscal stimulus still dwarfs as far the tariffs. Now, if this continues to escalate, it will be a bigger problem.
The information and material presented in this video are for general information only and do not specifically address individual investment objectives, financial situations or the particular needs of any specific person. Nothing in this material constitutes individual investment, legal or tax advice. Investments involve risk and an investor may incur profits or losses. Claims made in this video may not be representative of the experience of other clients and are not indicative of future performance or success.
This content does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.
Investment and Insurance Products:
Are Not FDIC or any other Government Agency Insured Are Not Bank Guaranteed May Lose Value
© 2018 SunTrust Banks, Inc.
Equal Housing Lender. SunTrust Bank - NMLS #93471. Member FDIC.
SunTrust, SunTrust PortfolioView, SunTrust Robinson Humphrey, SunTrust Premier Program, AMC Pinnacle, AMC Premier, Access 3, Signature Advantage Brokerage, Custom Choice Loan and SunTrust SummitView are trademarks of SunTrust Banks, Inc. All rights reserved. All other trademarks are the property of their respective owners.
Services provided by the following affiliates of SunTrust Banks, Inc.: Banking products and services are provided by SunTrust Bank, Member FDIC. Trust and investment management services are provided by SunTrust Bank, SunTrust Delaware Trust Company and SunTrust Banks Trust Company (Cayman) Limited. Securities, brokerage accounts and insurance (including annuities) are offered by SunTrust Investment Services, Inc., a SEC registered broker-dealer, member FINRA, SIPC, and a licensed insurance agency. Investment advisory services are offered by SunTrust Advisory Services, Inc., a SEC registered adviser. GFO Advisory Services, LLC is a SEC registered investment adviser that provides investment advisory services to a group of private investment funds and other non-investment advisory services to affiliates. Mortgage products and services are offered through SunTrust Mortgage, a tradename for SunTrust Bank, and loans are made by SunTrust Bank.
"SunTrust Advisors" may be officers and/or associated persons of the following affiliates of SunTrust Banks, Inc.: SunTrust Bank, our commercial bank, which provides banking, trust and asset management services; SunTrust Investment Services, Inc., a registered broker-dealer, which is a member of FINRA and SIPC, and a licensed insurance agency, and which provides securities, annuities and life insurance products; SunTrust Advisory Services, Inc., a SEC registered investment adviser which provides Investment Advisory services.
SunTrust Private Wealth Management, International Wealth Management, Business Owner Specialty Group, Sports and Entertainment Group, and Legal and Medical Specialty Groups and GenSpring are marketing names used by SunTrust Bank, SunTrust Banks Trust Company (Cayman) Limited, SunTrust Delaware Trust Company, SunTrust Investment Services, Inc., and SunTrust Advisory Services, Inc.
SunTrust Robinson Humphrey is the trade name for the corporate and investment banking services of SunTrust Banks, Inc. and its subsidiaries, including SunTrust Robinson Humphrey, Inc., member FINRA and SIPC.