Jason Lee: “Banking Stocks Rally As Interest Rates Rise, Here’s What To Expect"

By David Thompson

Apr 26, 2023 03:41 PM EDT

With the Federal Reserve signaling that it may raise interest rates sooner than expected, banking stocks have seen a surge in demand. Banks typically benefit from higher interest rates, which can increase their profits, and investors are closely watching to see how this trend will play out. OptionsSwing Founder Jason Lee leads the discussion on what to expect and where to look for investment opportunities in unpredictable times.

In view of the hyperinflation that has defined so much of the American economy over the last two years, large capital-markets banks like Citigroup, Bank of America, and JPMorgan Chase have been in a protracted recession. "Small to mid-sized banks, however, because the core earnings driver of their income is interest, can still make sequential improvements during these times," Lee explains. 

The average consumer has certainly noticed that assets like homes and cars are slowly starting to regain value. This means that banks can expect commercial loan renewals that tend to have relatively short maturity cycles. As dollars migrate into loans and out of cash, the dynamic for investors changes dramatically.

What is the best way to keep your balance sheet solid during these unpredictable changes? "Take the time to learn about investing," Lee says. "I want to help dispel this notion that you have to be a financial or numbers person. You really don't. Knowing what opportunities are out there is all about knowing where to find quality information." Through his own platform, OptionsSwing, Lee has created a community of investors ranging in experience from true novice to expert. He believes that a mixed approach to analyzing the market like this to be the secret sauce to staying liquid in stocks.

"I think everyone has figured out after Covid that one stream of income is not the safest bet, no matter how stable you believe your job to be or how high your salary," he states. "People just need to know that investment is that second stream, and being part of a community of investors that watch the market together means you have information when it can still make a difference. By the time it hits the news, it's usually too late." 

As for those rising interest rates, that is just a trend to watch too, Lee says. "The FOMC can choose to stabilize or change interest rates as the economy swings back up or down. Learning how to create long-term investments first, so that you have a portfolio that is less susceptible to some of these high volatility moments is wise for everyone." 

Lee would also like to remove the misconception around traders having to be folks with money to burn. "You can start with $100," he says. "Begin with companies that you already follow, companies that you have an interest in. Keep those shares as long as you can and just keep building. Make your investment budget a regular part of your savings allotment and you will see results no matter the upswings and downturns."

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