Finance

Fed must cut rates more aggressively due to jobs: Canaccord Tony Dwyer

Published

1 year ago

April 2, 2024

Business Finance News

Buy stocks on weakness that typically benefit from rate cuts, Canaccord’s Tony Dwyer suggests

The Federal Reserve may have new incentives in the second quarter to cut rates deeper this year.

Canaccord Genuity’s Tony Dwyer thinks a deteriorating jobs market and easing inflation will ultimately push the Fed to act.

“I’m not saying that they have to go back to zero, but they have to be more aggressive,” the firm’s chief market strategist told CNBC’s “Fast Money” on Thursday. “One of the most aggressive topics that I talk to clients about is how bad the incoming data is.”

Dwyer contends falling employment survey participation rates are skewing the Bureau of Labor Statistics’ jobs report data. The next monthly jobs reading is due Friday.

“It’s not that they’re manipulating the data. The conspiracy theories go bananas with this stuff. It’s really that they don’t have a good collection mechanism. So, the revisions are significant and most of them have been negative now,” said Dwyer. “Our focus now is those rate cuts are what you need.”

At the March Federal Reserve policy meeting on interest rates, officials tentatively planned to slash rates three times this year. They would be the first cuts since March 2020.

Dwyer expects the rate reduction will give financials, consumer discretionary, industrials and health care stocks a boost. The groups are positive this year.

“Our call is to buy into the broadening theme on weakness rather than simply adding to the mega-cap weighted indices. The top 10 stocks still represent 33.7% of the total SPX [S&P 500] market capitalization,” he wrote in a recent note to clients. “History shows that is historically high and doesn’t last forever.”

According to Dwyer, market performance will become much more even by the end of this year into 2025.

‘It’s not just the Mag 7’

“It’s coming from a broadening of the earnings growth participation. It’s not just the Mag 7,” he told “Fast Money.”

The “Magnificent Seven,” which is made up of Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia and Tesla, is outperforming the broader market this year — up 17% while the S&P 500 is 10% higher.

The S&P 500 closed at a record high on Thursday and just posted its strongest first quarter gain in five years.

“When you’re this overbought and this extreme to the upside, you just want to wait for a better opportunity,” Dwyer said. “In our view, that comes with there is worsening employment data that cuts rates. You have to worry about the economy. That’s when I want to go in.”

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Finance

Stocks making the biggest moves midday: WOOF, TSLA, CRCL, LULU

Published

11 hours ago

June 6, 2025

Business Finance News

Finance

Swiss government proposes tough new capital rules in major blow to UBS

Published

13 hours ago

June 6, 2025

Business Finance News

A sign in German that reads “part of the UBS group” in Basel on May 5, 2025.

Fabrice Coffrini | AFP | Getty Images

The Swiss government on Friday proposed strict new capital rules that would require banking giant UBS to hold an additional $26 billion in core capital, following its 2023 takeover of stricken rival Credit Suisse.

The measures would also mean that UBS will need to fully capitalize its foreign units and carry out fewer share buybacks.

“The rise in the going-concern requirement needs to be met with up to USD 26 billion of CET1 capital, to allow the AT1 bond holdings to be reduced by around USD 8 billion,” the government said in a Friday statement, referring to UBS’ holding of Additional Tier 1 (AT1) bonds.

The Swiss National Bank said it supported the measures from the government as they will “significantly strengthen” UBS’ resilience.

“As well as reducing the likelihood of a large systemically important bank such as UBS getting into financial distress, this measure also increases a bank’s room for manoeuvre to stabilise itself in a crisis through its own efforts. This makes it less likely that UBS has to be bailed out by the government in the event of a crisis,” SNB said in a Friday statement.

‘Too big to fail’

UBS has been battling the specter of tighter capital rules since acquiring the country’s second-largest bank at a cut-price following years of strategic errors, mismanagement and scandals at Credit Suisse.

The shock demise of the banking giant also brought Swiss financial regulator FINMA under fire for its perceived scarce supervision of the bank and the ultimate timing of its intervention.

Swiss regulators argue that UBS must have stronger capital requirements to safeguard the national economy and financial system, given the bank’s balance topped $1.7 trillion in 2023, roughly double the projected Swiss economic output of last year. UBS insists it is not “too big to fail” and that the additional capital requirements — set to drain its cash liquidity — will impact the bank’s competitiveness.

At the heart of the standoff are pressing concerns over UBS’ ability to buffer any prospective losses at its foreign units, where it has, until now, had the duty to back 60% of capital with capital at the parent bank.

Higher capital requirements can whittle down a bank’s balance sheet and credit supply by bolstering a lender’s funding costs and choking off their willingness to lend — as well as waning their appetite for risk. For shareholders, of note will be the potential impact on discretionary funds available for distribution, including dividends, share buybacks and bonus payments.

“While winding down Credit Suisse’s legacy businesses should free up capital and reduce costs for UBS, much of these gains could be absorbed by stricter regulatory demands,” Johann Scholtz, senior equity analyst at Morningstar, said in a note preceding the FINMA announcement.

“Such measures may place UBS’s capital requirements well above those faced by rivals in the United States, putting pressure on returns and reducing prospects for narrowing its long-term valuation gap. Even its long-standing premium rating relative to the European banking sector has recently evaporated.”