The Curious Case of the Banks Continues

Curiously, in a rising long-term interest rate environment…

The Banks are still dropping.

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The Banks are still dropping harder than the S&P 500 (SPY).

Despite the yield curve, which is still intact to its bounce (steepening) potential. A steepening yield curve would theoretically improve banking business from a borrow short, lend long perspective. Unless of course a steepening yield curve were foretelling an economic slowdown, in which case the Piggies would tamp down their lending operations.

And in a consumer credit-driven economy, that would not be good. It would spell economic contraction. There is another asset that likes a steepening yield curve and economic contraction, however. Not to sound like a gold pimp or anything, but there is a reason I have been focused on the global macro counterweight lately.

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