Is the economy growing enough to raise interest rates? The action in the bank stocks seems to say yes
There was a bit of a rally yesterday?on Fed jawboning and a tepid APD payroll number.? The economy is growing just not as much as anyone would like.? But is it growing enough to raise interest rates? The action in the bank stocks seems to say yes.? VIX was marginally lower but the backdated futures did not move too much.? If the NFP number is going to be a nothing VIX Oct futures should be dropping more but they are not.
That leaves banks moving higher sharply yesterday?in a relatively quiet market.? For the most part banks have not participated in higher equity prices so now they are playing catch up.? Trader are using the Tweets they hear and are loading up. I think the financials will move higher into the end of the year as they recover from fines, Dodd-Frank, low rates and a host of other regulations. ?The beaten stock is WFC and I think that has a nice road to move back up once it puts the recent troubles behind it.
The Trade
I like more aggressive short put spreads in the near term and roll them if necessary in WFC.? Nov? 43?s are a good place to start since the hit to earnings seems baked in already. ?We might get a short term pullback on the next Fed Governor missive so wait for that. ?WFC seems to have tanked already, however.
Disclosure- positions in WFC, multiple VIX position in the fund I manage risk for, Karman Line Capital LLC