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2019 Might Have Boded Well for Wall Street, But Fear of Lower Interest Rates Cutting into Profits Looms Large

Professor of Financial Economics and Part-time Value Investor, Transfin.
Jan 16, 2020 4:53 AM 1 min read


2019 might have boded well for Wall Street, but fear of lower interest rates cutting into profits looms large.

2019 seems to have been a rather good year for Wall Street. "Trading of stocks and bonds rebounded after a terrible end to 2018 and consumers spent tons of money on their credit cards, buoyed by a strong job market and steady economic growth", reported AP news. To add to this, JPMorgan Chase reported a record annual profit, while Citigroup posted its best results since before the Great Recession.


Inspite of this, there is an underlying fear that going forward, lower interest rates will slow down Wall Street, especially considering that the Federal Reserve cut interest rates three times in 2019, each time by a quarter of a percentage point, which has started to cut into banks’s interest income - the difference between what a bank charges for loans and what it pays out on deposits — which has been a major profit driver in the last couple of years. Click here for a deep dive into the matter. 


Extra Crunch: In an interview with ETNOW, Aswath Damodaran, Professor of Stern School of Business at New York University, said that we now live in a world that’s different from what it was before the 2008 crisis, and we may live in a world of low interest rates and high risk premiums for a long time. Read the full interview here.


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