New york, august 21, 2023 – leading macro expert, hugh hendry, expressed his views on the future of the us banking industry in an exclusive interview with kitco news. According to him, the U.S. Banking industry has the potential to experience significant share price declines over the next 16 months, given the potential for an economic recession.
Hendry, former chief investment officer of hedge fund eclectica asset management, explained that the early signals he has picked up indicate that the U.S. banking stock market is vulnerable to devaluation. In his observations, he sees the potential for a dramatic economic slowdown that could affect the financial condition of the banking sector. According to him, “The uncertainty is that economy could slow dramatically and that provisions for credit costs and impairments in the financial sector could increase and the valuation of banking stocks and other financial stocks could correct.”
Furthermore, Hendry states that during periods of financial uncertainty, the highest-rated banking institutions are likely to see their market capitalization shrink to close to the value of shareholders’ equity. As an example, he refers to JP Morgan which currently has a market capitalization of nearly $450 billion dollars with shareholder funds of over $290 billion. In recessionary conditions, the net asset value or shareholders’ funds are often pulled towards lower values.
Hendry cautioned that while leading entities such as JP Morgan are considered strong, risks remain especially in difficult economic situations. With the potential for a recession looming, he pointed out that there could be significant downgrades in the financial sector and stock markets globally.
Hendry’s “Two-year operation” refers to his observation period starting from the beginning of this year to the end of next year. Within this time frame, he expects his predictions to prove either right or wrong. While he feels confident about the possibility of a decline in the stock prices of U.S. Banks, he also recognizes that the timing is still difficult to pinpoint.
With that said, market participants and banking investors in the us are reminded to remain vigilant and watch economic and stock market developments closely in the upcoming months.
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