It is Monday morning, the start of a new week, but it might as well be Monday morning a week ago. Nothing changes as much as it remains the same …
The financial sector is closing in on some hefty closure. Aside from the legal and fiscal problems of the sector, the larger drag has been the Dodd-Frank reforms languishing for the last year. Soon enough, the regulatory reforms will determine the “new” state of being for Wall St. and the big banks.
A year after passage of the Dodd-Frank financial reform law, policymakers have yet to detail many of the rules that will determine if high-flying Wall Street giants become heavily regulated and marginally profitable financial utilities, or if they’ll simply get their wings clipped. In the next few months, three reforms linked to profits will come into focus: capital and liquidity standards, the Volcker limits on proprietary trading, and whether banks will have to restructure to make it easier for regulators to break them up.
The financial sector is approaching lows it has not seen in some time. The good news is buying opportunities are approaching quickly. The better news is those buying opportunities will pay off nicely. Simply, the financial sector is integral to an economic recovery and a market going higher. Once the uncertainty of regulatory reform disappears (and the other issues fall away), investors will return in spades to the sector. The financial sector will rise again.
If you get in at the bottom, which is near, you can be assured of making money, as the sector as a whole will go higher in tandem with the economy. My “theory” depends on all things being normal, meaning we raise the debt ceiling before August 2nd and no geopolitical crisis or natural disaster befalls the world …
Speaking of natural disasters … Japan is doing its part to re-energize the global economy. It is regaining its footing much more quickly than most anticipated. Many have underestimated the influence of the third largest economy on the planet contracting in the midst of a global economic recovery.
“Automakers are pushing forward production plans and companies are making efforts to limit the impact of summer power shortages on output,” said Takumi Tsunoda, senior economist at Shinkin Central Bank Research Institute. “We expect factory output to normalize in July-September.”
When Japan gets fully back on line, it will be like a shot of adrenaline for a runner approaching the finish line. It will be a spurt of energy for a tiring global economy and it will be a refreshing piece of news for nervous, withholding investors exhausted from all the negativity of the spring and summer.
Trade in the day – Invest in your life …
