U.S. bank stocks, including industry leaders Citigroup and Goldman Sachs, saw an impressive rise on Wednesday, buoyed by cooler-than-expected inflation data.
Citigroup and Goldman Sachs saw their shares jump 1.8% and 1.7%, respectively. Other regional banks followed suit, with Comerica rallying 3.1% and Zions Bancorporation climbing 2.8%.
The jump coincided with the Consumer Price Index (CPI) rising 3% on a year-over-year basis in June, lower than the 3.1% increase forecast by economists polled by Dow Jones.
On a month-to-month basis, the index saw a modest 0.2% rise, again falling short of predictions. The core CPI, which omits volatile food and energy prices, also rose less than expected.
These developments fuel speculation that the U.S. may achieve a ‘soft landing’, thus avoiding a recession, as inflation data indicates a cooler trend. Nigel Green, CEO and Founder of deVere Group, a leading global independent financial advisory, asset management and fintech organization, is among the proponents of this bullish analysis.
According to Green, the subdued CPI data ignites hope that the Federal Reserve could manage to curb inflation without pushing the U.S. economy into a recession.
His optimistic perspective stems from concerns that an aggressive monetary policy could force the world’s largest economy into a protracted or severe recession.
Green argues that the fight against surging prices is gaining ground, alleviating pressure on the Fed for future rate hikes. He also emphasized the resilience of the U.S. labour market, indicating no recession is likely in 2023.
His positive outlook is echoed in the markets, with Wall Street’s S&P 500 and the Nasdaq reaching their highest levels since April 2022 after the CPI release.
This shift towards an era of more stable economic growth has investors eager to seize new opportunities and rebalance their portfolios with the help of financial advisers.
“Tech, particularly software development, cloud computing, AI, cybersecurity, and e-commerce should do well,” predicts Green, highlighting the potential of the pharmaceuticals, biotech, medical devices, and healthcare sectors as well.
He also pointed to the prospects in sectors like construction, transportation, energy, utilities, and telecomms infrastructure, usually prioritized during periods of economic stability.
Green concluded his analysis, stating, “We’re not out of the woods yet, but it is increasingly likely the U.S. economy will not face a full-blown recession this year.”