Wall Street topped Main Street
With a host of banks reporting their earnings this week, a trend seems to be developing regarding the performance of banks during these early days of the Trump administration. Banks that derive most of their income from trading activities are outperforming banks that focus more on Main Street lending and services. That has got to be a rough data point for those who believed the rhetoric heard on the campaign trail a few short months ago (from either candidate!). The more things change…
Brits said they want to be Americans
Well, sort of. Liam Fox, the man tasked with negotiating trade deals for the UK, said getting London-based banks free access to Wall Street will be a key priority during UK-US trade talks. Prior to Brexit, UK banks enjoyed what is called “passporting” rights that enabled them to operate freely across the Continent. That is now up in the air, so the UK is looking to the US market to offset what could be a rough road ahead for its banks that operate in Europe.
The Trump administration is reportedly open to the idea of crafting a passporting-style deal for UK entities operating in the US. However, I think it would be wise to wait and see how those negotiations play out; in particular the lobbying that occurs before the negotiations. I doubt US banks love the idea of opening their markets to more competitors. And yes, it would be a wee bit of a reversal for an administration determined to install an “America First” mentality in its trade deals to suddenly open its arms to British banks as if they were, well, American.
Bankers flipped the script on geopolitical risk
With Brexit and the US presidential as a backdrop, it is easy to see how some investors are beginning to think that some developed countries represent greater geopolitical risk than third-world countries or those governed by authoritarian regimes. After all, democracies are forever evolving (volatile), but evil dictatorships tend to stay the same (stable).
Mind the Gap
Remember when I wrote yesterday about how Uber needs to worry less about technology risk and more about getting a handle on the political and reputational risks it is facing? Well … Shot. Chaser. Another shot. Another chaser.