Banks Pass Second Stress Test

Positive Test Allows Banks to Pay Dividends and Purchase Stock

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You may have noticed your news alerts flood your feed with notifications of big banks announcing dividend hikes and share buybacks.  This is a result of all 34 banks passing the second round of the Fed stress test.  The Fed tests a bank’s capital plans to determine if it could withstand a severe economic downturn.  Once the announcement was made that all 34 banks had passed their tests, many banks released their plans to increase their dividends and/or engage in share buybacks.

Generally speaking, companies increase dividends and purchase their own shares when they are feeling confident about their company.  Once Fed stress test revealed that most banks had more than enough capital on hands to withstand the level of economic downturn modeled in the test, the all clear was given for banks to return capital to their shareholders.  Now it will be up to the buyers and sellers of the market to analyze this news

Now it will be up to the buyers and sellers of the market to analyze this news and determine where the price of bank stocks will go.

This is not a recommendation to buy or sell securities. 

Banks Pass 1st Round of Stress Test

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The Fed Releases Results for First Round of Stress Test

As a result of the financial crisis, regulators placed greater restrictions on banks.  Each year the Fed initiates a “Stress Test” to determine the financial health of United States banks.  The Banks are assessed on how they handle a severe economic downturn.  This year the Fed modeled a grim economic situation – a 10% unemployment rate, a steep decline in housing prices, and a severe recession in the Eurozone.

On Thursday, June 22, 2017, the Fed announced all 34 banks measured passed the economic stress test.  Each year, the Fed changes the test in order to prevent banks from being able to trick the system.  If a bank does not pass the test, it is disallowed to pay out dividends until approved by regulators – a hefty punishment for stockholders.

In summary, the results showed that capital plans for banks are sufficient to continue lending, even during a severe economic downturn.  Stay tuned for more news.

Midyear 2017 Outlook

MidyearLPL researchers have released their Midyear 2017 Outlook.  Highlights include an overview of where four market drivers stand:

  1. Monetary policy
  2. Business fundamentals
  3. Economic growth
  4. Fiscal policy

The report also includes the themes that the LPL research team will be watching in the second half of 2017.

Take a look at the report and reach out to the Granite Wealth team if you’d like to discuss.

LPL Midyear Outlook 2017

Happy Fiduciary Day

GWM is Prepared for the New Rule!

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You may or may not have heard in the news of the new Department of Labor Rule taking place today June 9th, 2017.  In short, the DOL created a rule announcing tha all advisors who give investment advice must be Fiduciaries.  A fiduciary, by definition, is someone who is “one often in a position of authority who obligates himself or herself to act on behalf of another (as in managing money or property) and assumes a duty to act in good faith and with care, candor, and loyalty in fulfilling the obligation.”

This means that an advisor giving financial advice must act in the best interest of his or her clients.  Here at Granite Wealth Management, we are excited about this new rule because it now solidifies our core principals.  As an independent financial advisor, we take pride in being able to offer objective advice that is in the best interests of our clients. The most important step in this process is to have a deep understanding of our client’s goals, experiences, and risk tolerance.   Our clients can feel confident knowing their advisor team has been taking a proactive approach to ensure we act in our clients best interest.  Our investment due diligence, our internal processes, and our objective advice are all designed to support our clients best interest.

The GWM is excited and prepared for this new rule.  If you would like to hear more, please contact the office and we will be glad to share our process with you.

Contact: Kyle Crawford at (209) 846-0744, or email kyle@granitewealthllc.com