Between 2008 and 2022, investors and analysts following bank stocks lamented that rates had been at zero or near-zero since the Great Recession, depressing bank earnings.
However, higher interest rates haven’t exactly led to banks crushing it since that time
Obviously, the Silicon Valley Bank debacle in March 2023 raised fresh concerns about bank balance sheets, many of which were carrying unrealized bond losses. While the Federal Reserve lowered its overnight benchmark lending rate (the federal funds rate) on multiple occasions last year, the Fed is now projected to leave rates in the current range of 3.50% to 3.75% for the rest of the year, with a rate hike now expected early next year. Here’s what that means for bank stocks.
More than just higher rates — it’s about the yield curve Many people will simply tie higher interest rates to success with bank stocks, but it’s much more nuanced than that. It has more to do with the yield curve, which maps the various yields of U.S. Treasury bills, notes, and bonds.