Let’s say that a bank such as Goldman Sachs publishes a recommendation to “Buy Stock X”.
It’s hard to ignore a bet by a powerful investment bank such as Goldman. We are mere mortals in the pecking order, and they are supposed to be the all-knowing smart money from Wall Street.
Do we buy the stock, or is it simply wiser to pass?
Bank Performance Overall
The folks at InterTrader have done considerable legwork to dive deep into the data on investment bank recommendations made in 2015. They looked at every bet made by the 16 top banks throughout the year to assess both potential returns and accuracy.
The results are pretty underwhelming.
If you bought every stock recommended and held until the end of the year, here’s what your performance would look like:
Overall, when holding the stock picks for the year, banks were only 43% accurate with their predictions.
That’s right – flipping a coin would have been potentially more effective than buying bank stock picks, which ended up down -4.79% on the year. The S&P 500 finished down only -0.69%, but simply just making any interest in a savings account would have been more effective as well.
A Closer Look at Individual Banks
While banks as a whole struggled with picks in 2015, it’s also important to look at banks on a more micro level to see how they performed.
Here’s a look at the recommendations by Deutsche Bank, and how they did:
Deutsche Bank nailed 41% of their predictions, and had a -8.93% return if picks were held throughout the year.
As you can see, some of their picks such as Microsoft and Wix.com gained double digits. On the other hand, recommendations such as Whiting Petroleum got absolutely crushed throughout the year, dropping -70.1%.
Overall, Deutsche Bank’s performance here definitely didn’t do much to help the struggling company get out of its rut.
Which Banks Were Most Accurate?
Here are the banks, from best to worst, based on accuracy of their calls:
Nomura, Credit Suisse, BAML, and Barclays all batted above .500 if stocks were held throughout the year, while 10 banks all did worse than a coin flip.
Citigroup had an off year, only nailing 14% of its picks.
Which Banks Had the Best Returns?
Here are the banks, from best to worst, based on the performance of these recommendations:
Just two banks, Credit Suisse and Nomura, had positive returns if stocks were held through the year. Meanwhile, Canaccord Genuity’s picks were knocked down -16% over the course of 2015.
An Important Caveat
Throughout the above article, we are showing the results if stock picks were held from when they were made until the end of the year.
However, it is worth noting that the investment banks actually did slightly better if picks were held for shorter durations of time:
|End of Year||43%||-4.79%|
In other words – if you sold all stock recommendations exactly 30 days after buying, you would have actually made a 0.8% return throughout the year. This is still a lower return than a savings account, but it is an improvement on losing -4.79%!
For a more in-depth dive into the data, we highly recommend checking out InterTrader’s interactive version of the results.
Visualized: Real Interest Rates by Country
What countries have the highest real interest rates? We look at 40 economies to analyze nominal and real rates after projected inflation.
Visualized: Real Interest Rates of Major World Economies
Interest rates play a crucial role in the economy because they affect consumers, businesses, and investors alike.
They can have significant implications for people’s ability to access credit, manage debts, and buy more expensive goods such as cars and houses.
This graphic uses data from Infinity Asset Management to visualize the real interest rates (ex ante) of 40 major world economies, by subtracting projected inflation over the next 12 months from current nominal rates.
Nominal Interest Rates vs. Real Interest Rates
Nominal interest rates refer to the rate at which money can be borrowed or lent at face value, without considering any other factors like inflation.
Meanwhile, the real interest rate is the nominal interest rate after taking into account inflation, reflecting the true cost of borrowing or lending. Real interest rates can fluctuate over time and are influenced by various factors such as inflation, central bank policies, and economic growth. They can also influence economic growth by affecting investment and consumption decisions.
According to the International Monetary Fund (IMF), since the mid-1980s, real interest rates across several advanced economies have declined steadily.
As of March 2023, Brazil has the highest real interest rate among the 40 major economies shown in this dataset.
Below we look at Brazil’s situation, along with the data of the four other major economies with the highest real rates in the dataset:
|Nominal Interest Rate||Real Interest Rate|
In general, countries with high interest rates offer investors higher yields on their investments but also come with higher risks due to volatile economies and political instability.
Below are the five countries in the dataset with the lowest real rates:
|Nominal Interest Rate||Real Interest Rate|
|🇨🇿 Czech Republic||7.00%||-7.17%|
Hyperinflation, as seen in Argentina, can lead to anomalies in both real and nominal rates, causing problems for the country’s broader economy and financial system.
As you can see above, with a 78% nominal interest rate, Argentina’s real interest rates remain the lowest on the planet due to a staggering annual inflation rate of over 100%.
Interest Rate Outlook
Increasing inflation and tighter monetary policy have resulted in rapid increases in nominal interest rates recently in many countries.
However, IMF analysis suggests that recent increases could be temporary.
Central banks in advanced economies are likely to ease monetary policy and bring interest rates back to pre-pandemic levels when inflation is brought under control, according to the fund.
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