Time to call the exterminator?

It was another volatile week for stocks and bonds, while gold’s unrelenting march higher continued. The latest bout of volatility was driven by renewed trade tensions and developing fears within US credit markets.

Last week, several regional banks disclosed potential losses stemming from another alleged fraudulent borrower, following similar instances over the past month. The announcement came just days after JP Morgan CEO Jamie Dimon warned that ,“when you see one cockroach, there’s probably more,” in response to a comparable situation. These items, while likely isolated, have raised broader concerns about borrower health. The reason is many of the loans fall under “non-depository financial institutions,” a high-growth, but less transparent, portion of bank loan portfolios.

Despite the noise, bank earnings have generally been strong. Demand for investment banking services, such as M&A advice, continues to accelerate, supporting healthy profit growth. Management teams also expressed a sanguine view of the health of their loan portfolios, potentially to counter to the recent headlines. As investors digest these results, attention will begin to shift toward upcoming announcements from broader industrial sectors.