TheStreet's top fixed-income columnist Peter Tchir says investors could be disappointed by financials in the second half.
"They're going to get warnings on what's going on in the fixed income, rates, and currency-trading desk -- and [that's] what moves the needle," Tchir said during TheStreet's latest Trading Strategies roundtable for investors.
While some investors think Federal Reserve rate hikes could steepen the yield curve -- which is normally good for bank stocks -- Tchir said investors should focus more on financial firms' transaction-based businesses. After all, he noted that there's little long-term correlation between the yield curve and bank earnings.
Tchir cautioned that banks' transaction-based businesses have been fairly slow recently, which could serve as a drag on profits.
"I think you're going to get some earnings warnings," the columnist said. "I'm against the financials here."
Financials rode a high after Donald Trump won the election last November, with investors optimistic that the businessman would promote a pro-bank agenda. The rally cooled off in March, although banks are still having a positive year, with major North American banks up 7.2% year-to-date, according to FactSet data.
How to Play 2017's Second Half
Our July Trading Strategies roundtable and accompanying special report highlights lots of ways to invest over the next six months. Click below to check out:
- Fisher Investments' William Glaser, Look Beyond America's Borders in the Second Half
- Video anchor Scott Gamm, This Is Your Investing Playbook for 2017's Second Half
- Real Money Pro columnist Bret Jensen, Why I Hate the FAANGs (but Like Banks and Biotech) for 2017's Second Half
- Stocks columnist Stephen "Sarge" Guilfoyle, Disney, Nvidia, Wal-Mart and 12 Other Stocks I Like for 2017's Second
- Fixed-income expert Peter Tchir, 10 Investments I Like for a Risk-Filled Second Half
- Gold columnist David Yoe Williams, These 3 Majors Areas of Concern Should Frighten Stock Market Bulls
- Foreign-exchange columnist Douglas Borthwick, Why the U.S. Dollar Will Only Drop More in 2017's Second Half
- Staff reporter Anders Keitz, Stocks Could Rise 'Substantially' in Coming Months, Nobel-Winning Economist Robert Shiller Says