Strategic trade
Trade view / 25 November 2015 at 12:29 GMT

#SaxoStrats: Regional banks to outperform ahead of Fed hike

Head of Equity Strategy / Saxo Bank
Instrument: IAT:arcx
Price target:
Market price:

Shares of the iShares US regional banks ETF are up 14% since their August bottom as investors buy into the Federal Reserve's message about the looming USD rate normalisation likely to begin in December.

Banks have the beta to USD rates with US regional banks having the highest interest rate sensitivity. Higher USD rates in 2016 (we expect four hikes) will lift NIM and boost profitability. 

The US economy can absorb higher rates as the labour market remains robust providing a healthy backdrop for commercial loan demand, boosting top-line growth for US regional banks.

Management and risk description

Key risks include a lower-than-expected USD rate path in 2016, weak US macro, and/or dovish statements from the Fed.


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Source: Saxo Bank 


Entry: buy IAT:arcx at market.

Stop: trailing stop price $33.30, steps of $0.30.

— Edited by Michael McKenna

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Non-independent investment research disclaimer applies. Read more


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