Big Wall Street bond-trading houses like JPMorgan have been plagued over the past year by a spell of unusually low price swings in fixed-income and commodities markets.
Investors are looking for clues on whether Trump's tax cuts will fuel enough growth to spur faster inflation, which in turn could prompt the Fed to accelerate increases in benchmark interest rates.
The Federal Reserve raised rates three times this year, the most since before the 2008 financial crisis, and is on track for further increases next year with economic growth solid, unemployment at a 17-year low and inflation subdued.
Economic data look great. Growth is solid, unemployment is at a 17-year low and stubbornly low inflation is rising. So the Fed is justified in raising rates -- including a likely hike at a meeting on Wednesday. But Bank of America is reminding investors that a rate-hiking cycle is rarely painless.
Citigroup CFO John Gerspach says this year's unusually low price swings in bond markets have continued into the fourth quarter, with trading profits expected to fall more than the 15% drop projected by rivals JPMorgan Chase and Bank of America.
Bank of America economists and analysts say the bull market is showing signs of cracking, possibly leading to a big market correction in mid-2018.
Unusually low price swings have hurt Wall Street banks' trading profits this year, and there are few signs of a revival as the end of the end of the year approaches.
Big retailers like J. Crew and Toys 'R' Us have defaulted on their debts, and more companies are likely to follow given the ongoing shift toward online shopping. Now there's a way for stock investors to profit from the slide -- and it doesn't necessarily involve buying Amazon.com shares.
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