• Hugh Hendry, a macro guru and former chief investment officer of hedge fund Eclectica Asset Management, predicts the US banking industry could witness a deep devaluation if the economy goes into a recession over the next 16 months.
• He believes that even top-ranked banking institutions will see their market caps dwindle to a figure close to the value of their shareholders’ equity.
• According to Hendry, there is significant price risk in the financial sector and overall stock market globally.
US Banking Industry Could Take Massive Hit To Stock Prices
The US banking industry could take a massive hit to its stock prices within the next 16 months, according to macro guru Hugh Hendry. In an interview with Kitco News, Hendry said that if the economy goes through a period of recession, US banking stocks could suffer deep devaluation.
Hendry predicts that during tough financial times, top-ranked banking institutions could see their market caps dwindle to a figure close to the value of their shareholders’ equity. This means that even best-in-class entities like JPMorgan Chase & Co. (JPM) would not be safe from experiencing sharp declines in stock prices. Currently JPM has a market capitalization of nearly $450 billion dollars and shareholder funds at $290 billion; however both figures could come closer together due to economic peril.
According to Hendry there is significant price risk in both the financial sector and overall stock market globally due to potential economic slowdowns or recessions. This means investors need to be aware of potential losses they might experience when investing in banks or any other type of financial institution during these uncertain times.
Risk Management Strategies
Hendry suggests exercising strategies that give investors two years before they need to be proven correct or wrong on investments made during these times of uncertainty and peril. Knowing this timeline can help investors adjust their risk management strategies accordingly so as not to lose too much money should markets take turns for worse than expected within those two years.
The possibility exists for US banking stocks and other financial stocks globally suffering sharp declines should economic conditions worsen over time – something which needs careful consideration by all investors when deciding where and how much money they are willing or able invest over short terms periods such as two years or more in order mitigate risks associated with such downturns should they occur down the line