CHICAGO (Reuters) – If you were betting on a big rebound for any one sector this year, you probably would have put your money on banking instead of manufacturing.
The more glamorous rebound story has been banking and the financial services sector, but with the revelation of a $2 billion trading loss at JP Morgan Chase & Co, it’s clear some of the biggest banks may have not taken the lessons of 2008 seriously. They continue to bad-mouth and fight reforms and engage in risky derivatives trading, and there is likely more dirt under the carpet in that sector.
Megabanks are difficult to divine. The economy might be rebounding, but they might not lend widely and focus instead on making more money from their trading desks, which are still largely a black box to investors.
“Investors should stay away from financials,” says Lee Munson, a money manager with Portfolio LLC in Albuquerque, New Mexico, and author of “Rigged Money.” “I can’t figure out what’s in them. There are more time bombs out there.”
U.S. manufacturing, in contrast, is a warts-and-all comeback kid story that doesn’t get much attention. Many of the industries left for dead in the wake of the Great Recession have undergone massive restructuring and are much more productive than they were five years ago. Industrial production posted its fastest growth in a year in April, according to the Federal Reserve.