Goldman Sachs Upgrades Large US Banks to 'Neutral'
PNC Financial Services Group Inc
Goldman Sachs upgraded large US banks to "neutral" due to the substantial capital raised by the banks and prospect for strong gains into the second quarter, the Goldman's analysts said in a research note.
The move follows the recent upgrade of Bank of America [BAC 11.49 --- UNCH (0) ] to "conviction buy," alongside JPMorgan Chase [JPM 34.72 0.17 (+0.49%) ], and takes into account "the prospect for continued strong mortgage and capital markets earnings which is likely to persist in the second quarter," the analysts wrote.
Besides, "the leveraged loss cycle for large banks may be over," they wrote, noting that the stress tests induced $100 billion of capital raised at big banks, cutting leverage. Writedowns may also be nearing an end as stock market indices are improving.
Goldman Sachs [GS 138.60 2.16 (+1.58%) ] rates Morgan Stanley [MS 28.15 0.15 (+0.54%) ] at "buy" and PNC [ Loading... () ], US Bancorp [USB 18.03 -0.45 (-2.44%) ] and Wells Fargo [WFC 24.32 -0.14 (-0.57%) ] at "neutral." Citigroup [C 3.71 0.02 (+0.54%) ] is not rated.
They did the same thing with other sectors this week after we have reached expensive levels. At the lows they were rather being cautious and came up with earnings of 45$ for the 2009 SPX and 50$ for next year which would make the market very expensive at current levels (PE 18-20). Since their business is proprietary trading and they run the biggest risk book again on Wallstreet it is in their best interest to get others to buy the long side now as they rather entered the market at the lows ( someone bought tons of calls exactly at the low).
The Obama administration does not show any interest for their big market manipulation since it is seems to be in their interest that the markets are rising since that lifts the consumer sentiment. The problem is only that these levels will not be sustainable going forward. For the next 2-3 months we might even go up to SPX 1000 roughly but that is a level one should consider as the last exit and sell most of your stocks if not all in case your just a long time investor and can not follow the markets. Switch into hard assets thereby real estate will not be a good investment til late 2010 probably when prices hit a bottom in real terms. The point is long term that hyper inflation will drive prices higher not necessarily an economic upturn.