When, three months ago, Moody’s advised to buy the banking sector…
Prestigious rating companies must necessarily get the economic forecasts right: they have perfect valuation models, they can decide, with a plus, a minus or a letter, the fate of entire nations. Because if this were not the case, we should think that our future, and that of our savings, is in the hands of a cynical and cheating destiny.
In fact, at the beginning you can see the advice given for 2023 by Moody's, perhaps the most prestigious of the rating companies. The link to read the article can befound here. Moody's forecast a profitable and calm year for the sector, driven by the increase in rates which would have led to an increase in margins and therefore in the profitability of institutions. Obviously he forgot the depressive effect on stocks that the increase in interest rates entails and which could weigh down credit institutions.
In fact it went like this… or not? It can be seen that Moody's had not foreseen the bankruptcy of the SVB and the Signature bank (yet it prepares the ratings for these institutes) and had not foreseen the Credit Suisse case. The credit sector listed on the S&P scored a nice -20% as a whole….
What does this teach?
- being a large company does not provide any guarantee of correct assessments and market forecasts. Indeed, often a large company, which takes money from customers to grant ratings, has unclear ideas and is influenced by direct interests;
- that you must not trust anyone and must always operate with a grain of salt.
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The article When, three months ago, Moody's advised buying the banking sector… comes from Scenari Economici .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/quando-tre-mesi-fa-moodys-consigliava-con-comprare-il-settore-bancario/ on Tue, 28 Mar 2023 19:23:16 +0000.