“Big Short” investor Steve Eisman, who predicted the 2008 housing crisis, believes the Fed will not cut rates this year as many expect.
In a new interview on CNBC’s Fast Money, Neuberger Berman’s senior portfolio manager says major U.S. banks could suffer if the Fed remains aggressive in 2024.
“Let’s pick one bank, and I have no position in this bank and I have nothing against the company, Bank of America. So Bank of America is a very well run bank. There is a very good CEO. That doesn’t mean they haven’t made mistakes. They bought a lot of long-term bonds at the wrong point in the cycle. It’s not a balance problem. It’s more of an income problem.
So if you look, revenues have actually been flat for the last few years, up and down by just a small percentage. So how are you going to make money at Bank of America? You actually need two things. You need the Fed to lower interest rates. So that will help people’s perception of balance. And you don’t need a recession, so good credit. Could that happen? Certainly.”
However, Eisman said he believes the Fed will not start cutting rates this year due to ongoing concerns about rising inflation.
“The market seems to think the Fed will cut rates at least three times this year. At the moment I don’t have that view. I think the Fed is still terrified of making this mistake [Paul] Volcker made this in the early 1980s when he stopped raising interest rates and inflation spiraled out of control again. So I am not very positive about the Fed’s interest rate cuts.
And if that’s true, I think it will be difficult to make money at the big banks in the money center. That’s not a company-specific call. That’s a real macro-y call. It’s difficult to make a long-term investment case for the banks when you have to deal with so many macro factors like that.”
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