Vulnerable European Banks May Effect US Market

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In the United States, the big banks are killing it with their latest statement – so far, these have been doing great in the market. Bank of America for one exceeded the predictions of analysts as shown in their statement on Monday. The same trend was also seen across other banks – Citigroup, Wells Fargo, and JP Morgan all did pretty well this week.

However, some experts fear that this trend could end soon because of the possible withdrawal of Britain from the European Union (BREXIT). Some analysts are now saying that the effects will eventually spill over to the United States and the happy days could easily be over just as soon as they started.

Larry McDonald of the Analytics (he is also the editor of The Bear Traps Report) says that the positive trend in the bank statement reports is mostly due to the fact that current reports claim that there is a rising rate, and this is what made the yield curve increase further. McDonald told that while the quarter yielded earnings for this season, he fears that the negative impact of the looming BREXIT could be greater than the present gain later on which could put the economy back to square one. He says that even though the growth continues for now, the incoming news in Europe will affect stock prices negatively. McDonald predicts that the economy will soon gear towards the toxic Deutsche Bank atmosphere which was the trend a few weeks ago, and that once this happens, the US financials will suffer.

If McDonald’s predictions are proven correct, then businessmen who have investments overseas will be the ones who will be first bothered by the limbo. However, Erin Gibbs of S&P Global says that investors are now changing their portfolio and are trading more – he says that these indicators are good and that things could get better. Unlike McDonald, he even predicts that estimates could be higher next quarter.