The markets today appear poised to open on a positive note with most major indicators in the green at time of writing. (The NASDAQ is in the red at this time.) These indicators can change during the runup to the opening bell and at any time afterwards.
Markets closed yesterday pointing down with the impact of vaccine delays, bank reports, uncertainties over stimulus and the antics of ‘the usual suspects’.
Today’s results will provide investors with both positive and negative news resulting from the COVID 19 pandemic.
While it is difficult to imagine positive effects from the crisis, Goldman Sachs may provide an example in its report expected before the markets open this morning. Analysts expect a rise in trading revenues due to market volatility, at least partially due in turn to the pandemic, as well as low interest rates, vaccine developments and political uncertainties. Goldman Sachs is one of the gold-standard financial institutions and developments there are a kind of economic weathervane.
However, another gold-standard bank appears poised to release the kind of bad news about COVID 19 fallout that we have come to expect. Bank of America is scheduled to report this morning, also before the market opens. It will likely report a decrease in profit as a result of rock-bottom interest rates, increased loan provisions and decreased loan demand as both businesses and consumers cut back as a result of the crisis.
Amongst other financial institutions issuing third quarter reports, US Bancorp and PNC Financial Services will also announce quarterly results today.
Morgan Stanley is expected to report on Thursday, also for its third quarter.
The gold standard status of these (and other) financial institutions can make them a kind of ‘crown jewels’ in a portfolio. They may or may not merit a place – or even an increased place – in an investor’s holdings. As with other types of investments, the desirable proportions and sectors will vary from investor to investor and are best discussed at length between investor and licensed financial advisor. It may be that two distinct conversations are called for here: one immediately and another one when the proverbial dust settles in Washington in January 2021.
Wells Fargo, also set to report today would not currently qualify as a gold-standard institution. It also has to continue burnishing its iconic brand, damaged by the selling scandals. However, investment firm Morningstar Inc. argues that the bank’s legal and regulatory issues will eventually fade away. Still, Wells Fargo has many strengths including its size by assets, strength in credit and debit cards and what is reportedly the largest retail branch network
Like Bank of America, Wells Fargo could post lower profits due to rock-bottom interest rates and reduced loan demand.
Disclosure: I am not now and have never been a licensed financial advisor. However, as a journalist I have interviewed upwards of 300 licensed advisors in several countries over the years and believe that I understand what they bring to their clients.