Morning Notes — Q2 Outlook

Ultimately, we expect higher bond yields, more curve steepening and a return of cyclical/value equity leadership during Q2.  Look for improving mobility trends to result in better forward guidance from cyclical/value companies during Q1 earnings results.  As an anecdote, consider NYC toll traffic (bridges and tunnels) is currently on pace for its busiest April in 7 years.

Banks: Large cap banks posted ‘low quality’ earnings beats this morning and investors are mostly ‘looking across the valley’ as expected.  Net Interest Income (NII) and loan growth are considered ‘core’ operations for banks, but it’s too early in the cycle to expect major improvement in either category.  We expect gradual improvement in large cap bank NII and loan growth to begin next quarter.  Regional banks should see much faster improvement in both and we expect the group to gain market share over large cap banks and Fintech during the recovery.