Financial ETFs to Watch This Week
NEW YORK (TheStreet) -- The financial sector has made an astounding recovery from its March 2009 lows, and after JPMorgan Chase (JPM) beat expectations by reporting fourth-quarter earnings of $3.3 billion, investors are hoping for more positive earnings headlines this week.
Nevertheless, a close look at JPMorgan's results and broader trends suggest banks haven't completely rounded the bend.
When analyzing JPMorgan's results, it appears that its profits were primarily driven by its investment banking and trading operations.On the positive side, the outlook for mergers, acquisitions and initial public offerings (IPOs) is somewhat bright. In fact, a recent study revealed that venture capitalists expect IPO activity and venture-backed funding to increase dramatically in the coming year. But the bank's trading profits, which in part resulted from the stock market's big run-up in the wake of its March lows, will be hard to repeat now that many investors believe stocks are close to reflecting their true value. Elsewhere, trends are not too promising for retail financial services operations, which are a huge portion of the financial sector. A weak housing market, high unemployment and shaky consumer confidence continue to take their toll on residential loans as credit losses continue to mount and loan-loss reserves continue to balloon. In fact, consumer loans are shrinking, and November 2009 showed the biggest drop in consumer credit on record. This can be detrimental to the overall financial performance of financial firms because it is a highly profitable portion of their overall business.
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