Could Rate Rises Hurt Financials?
Something I gleamed from Seeking Alpha (work by Ivan K. Wu):
"An interesting question circulating in this year's Q4 earnings calls has been the idea that policy benefits like tax cuts and deregulation could be competed away by irrational behavior.
This is an insightful observation because it gets to the point of markets being dynamic and challenges our basic assumptions that earnings go up as interest rate rises or when regulations are rolled back.
But in the real world, how would a lender react when the price of money goes up? Well, they'd be more inclined to make loans. But here's the thing, every other lender on the block will be thinking the exact same thing, which could drive margins back down for the entire industry (but increasing the risk on everyone's books). The same dynamic applies for lower taxes."
What do you think? Surely no bank would forgo the benefits of lower rate individually, but could higher rates be a curse in disguise?
