Wall Street and Main Street are both scared of inflation, and how the US economic recovery will hit their wallets

Wells Fargo ATM
Banks large and small, both national and regional, are seeing increased interest in digital and contactless services, as the coronavirus pandemic has forced consumers to rethink the kind of banking interactions they’re comfortable having.

  • Americans of varying backgrounds are growing increasingly concerned of rampant inflation.
  • Google searches for “inflation” reached a record high this week, according to Deutsche Bank.
  • Surveyed fund managers now see high inflation as riskier to markets than the pandemic, BofA found.
  • See more stories on Insider’s business page.

Forget the pandemic. Inflation is the new issue haunting Americans, on Wall Street and Main Street alike.

Celebrations over vaccine approvals and falling COVID-19 case counts are giving way to concerns over just how quickly the economy will recover – and what that means for prices.

New stimulus signed earlier this month promises to send hundreds of billions of dollars directly to Americans and supercharge consumer spending. And shortly afterward, the central bank underscored that it will support a strong recovery this year, as the Federal Reserve reiterated that it plans to maintain ultra-easy financing conditions at least through next year.

The potent combination of monetary and fiscal support has many fearing a sharp jump in inflation. The eventual reopening of the US economy is expected to revive Americans’ pre-pandemic spending habits. Yet an overshoot of expected inflation could spark a cycle of increasingly strong price growth that leaves consumers with diminished buying power.

Worries of such an outcome are shared among both the investor class and the general public. Google searches for “inflation” surged to their highest level since at least 2008 last week, according to research by Deutsche Bank Managing Director Jim Reid. Dovish investors might highlight that similar spikes emerged after the financial crisis, but hawks can point to the unprecedented scale of pandemic-era relief for why today’s situation stands out, Reid said in a note to clients.

“Whether or not inflation ever materializes there is a rational reason why this time might be different. That’s reflected in the increased attention on inflation,” Reid added.

The theme that this time might be different was echoed by a UBS team led by Arend Kapteyn, who wrote in a March note that “pandemic price movements have been unusually large … and are historically difficult to model/predict.”

More recently, a survey from data firm CivicScience shows 42% of adults being “very concerned” about inflation, according to Axios. That compares to just 17% saying they’re “not at all concerned.”

Inflation worries investors more than Covid

Also, institutional investors are shifting their focus from the pandemic to the risk of rampant inflation. Higher-than-expected inflation is now the biggest tail risk among fund managers, according to a recent survey conducted by Bank of America, higher even than the pandemic itself. Snags to vaccine distribution fell from the top of the list to third place, while a potential bond-market tantrum was the second most-feared risk.

To be sure, younger Americans seem less perturbed. The gap in inflation expectations between the baby boomer generation and millennials is the widest its ever been, a team of Deutsche Bank economists led by Matthew Luzzetti wrote earlier this month.

The disparity is likely a product of vastly different circumstances, according to the team. Older investors lived through the “Great Inflation,” a period from the mid-1960s to the early 1980s during which inflation surged and forced interest rates to worrying highs.

Younger Americans have only known a quarter-century of inflation landing below the Federal Reserve’s 2% target, and millennial investors could have a massive influence on whether inflation expectations and real price growth trend higher as the economy reopens, the bank’s economists said.

“With memories of the Great Inflation possibly already lifting inflation expectations for older age groups today, a more material drift higher in expectations likely would require a lift from the younger age groups,” they added.

CivicScience’s newer data suggests that gap is quickly closing. More than half of respondents aged 18 to 24 said they’re “very concerned” about inflation, more than any other age group surveyed. By comparison, just 37% of Americans aged 55 and older said they’re “very concerned.”

Respondents aged 35 to 54 were still the most worried overall, with 48% saying they’re “very concerned” and 36% saying they’re “somewhat concerned,” according to CivicScience.

Kapteyn’s note for UBS highlighted that the conversation around inflation closely resembles the one following the Great Recession: “A decade ago, following the global financial crisis, we were having very similar conversations with clients as we are now.”

At that time, fears of a quick recovery fueling an inflation bubble were similarly strong, “but instead we wound up in secular stagnation,” the bank wrote, referencing the phrase made famous by prominent economist Larry Summers to describe prolonged low growth and low inflation.

This suggests that Americans’ worries about future price growth – including warnings from Summers himself – could starve the US economy of healthy growth and rehash the last decade’s plodding recovery.

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Weekly inflows into stocks hit $68 billion globally last week, the most since 2003 as investors position for further growth, Deutsche Bank says

stock traders

Investors piled the most money into stocks since 2003 last week as optimism for further growth continues, according to Deutsche Bank.

A team of strategists from the firm found that global equity funds saw $68 billion of inflows last week, the largest input since 2003, driven by a record $53 billion into US funds. According to Deutsche Bank, this brings the cumulative flows from November 2020 to $450 billion.

On a sector level, tech funds saw $3.2 billion in inflows, with financials ($2.2 billion) and energy ($1.3 billion) trailing right behind in a sign that investors are betting for further growth.

“Scaled by assets under management, the pace of equity inflows is at the top of its historical range. It is also well supported by forecasts of strong growth ahead,” the strategists wrote.

The firm also found that the percentage of investor portfolios in stocks has continued to grow higher. The level of equity positioning is now near the all-highs last since in early 2018.

Deutsche Bank said positioning in stocks is likely to continue in the near term. However the firm anticipates a peak in growth sometime in the second quarter of 2021 that will cause a pullback in stocks as investors position their attention away from markets and “find something else to do” as the economy re-opens.

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Stocks could pull back 10% in the second quarter when stimulus-fueled growth peaks, Deutsche Bank’s chief strategist says

NYSE Trader worried red
A trader works on the floor at the New York Stock Exchange (NYSE) in New York, U.S., February 28, 2020.

  • Stocks could pull back as much as 10% in the second quarter, Deutsche Bank said.
  • The pullback will be prompted by a peak in economic growth and a downturn in retail investor inflows as people return to their pre-pandemic routines.
  • In the near-term, Deutsche Bank sees stocks continuing to gain.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

Deutsche Bank’s chief global strategist expects stocks to pull back as much as 10% in the second quarter of 2021 as economic growth peaks.

In a Friday note a team of strategists led by Binky Chadha said they expect a “significant market consolidation” between 5%-10% sometime in the second quarter.

“The more front-loaded the impact of the stimulus, and the direct stimulus checks at around a quarter of the new package clearly are one off, the sharper the peak in growth is likely to be,” the strategists said. “The closer this peak in macro growth is to warmer weather (giving retail investors something else to do); and to an increased return to work at the office, the larger we expect the pullback to be.”

In the nearer term, Deutsche Bank expects stocks to continue to go up as investors pile into stocks with new stimulus money. On Monday morning the Dow Jones hit a record high, buoyed by optimism for strong economic growth following President Biden signing the $1.9 trillion stimulus program into law last week.

The strategists also raised their year-end S&P 500 price target to 4100, up from 3950 previously, because they see stocks rallying back after the second quarter pullback. That gives the benchmark index nearly 4% upside from current levels.

But investors should be selective about stocks they choose against this backdrop. Deutsche Bank’s top sectors are energy and financials, while industrials, materials, and cyclical consumers received a “neutral” rating, because these groups have already priced in strong macro growth after outperforming since November.

Meanwhile, returns on mega-cap growth stocks and technology names are likely to remain flat throughout the year, Deutsche Bank added.

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Big banks, including Deutsche Bank and Bank of America, are testing employees for COVID-19 before they step into the office. Insider took a closer look at their plans.

Arizona covid-19 testing coronavirus
Physician John Jones, D.O. tests administrative assistant Morgan Bassin for COVID-19 at One Medical in Scottsdale, Arizona.

  • As COVID-19 continues to spread, big banks worldwide are monitoring staff that come into the office.
  • Deutsche Bank, Credit Suisse, and BoA are all testing employees for COVID-19, sources told Insider.
  • JPMorgan and Wells Fargo said they require employees to complete a health check before they arrive.
  • Visit the Business section of Insider for more stories.

Major banks worldwide have launched COVID-19 testing programs in order to enable a return to work for some employees during the pandemic.

Some banks are offering their staff lab-based PCR tests, which are considered the most accurate way of detecting coronavirus, but they can cost around $100 to process, per The New York Times. Results of PCR tests usually come back within a couple of days.

Other banks are providing antigen tests, also known as lateral flow tests, which give results in about 15 to 30 minutes. Both antigen and PCR tests require swabbing the nose or throat.

“I have been back at work since the start of the year and have been asked to produce three negative test results every week,” a source who works in a bank in London told Insider on the condition of anonymity. “It’s a bit stressful but the antigen tests are quick and I have got into a nice routine now. It’s also nice to be able to go back to work, although I miss the pre-COVID office environment,” they said.

However, a number of other banks are asking employees to fill out questionnaires about possible symptoms and exposure to the virus before they come into the workplace.

Insider spoke with sources working in banks across the world to get a sense of return-to-work plans. 

Deutsche Bank

Twice a week, Deutsche Bank is testing UK employees considered key workers that work on the busiest floors in the office, sources familiar with the system said. They are being tested with PCR tests. It’s unclear whether staff working on other floors are being also tested.

Deutsche Bank declined to comment to Insider.

Bank of America

Bank of America is testing employees on a weekly basis if they’re coming into the office, according to sources familiar with the matter. The testing is currently targeted at UK offices, and there are plans to roll out the tests to the rest of Europe, the Middle East, and Africa region. 

Bank of America declined to comment.

Read more: Bank of America has promoted 86 managing directors in its sales and trading, research, and operations groups – here are all the names

JPMorgan

JPMorgan told Insider that employees coming into the workplace in all locations are required to take a daily health check before entering an office. The health check is a survey that can be completed via mobile or laptop, and asks if you’ve been exposed or in close contact with someone who is infected with COVID-19 or showing related symptoms.

The bank said the daily health checks had been in place since the pandemic began in March.

On top of this, JPMorgan is also sending at-home testing kits to staff, if they want one. Employees are also able to book a PCR COVID-19 test at one of the bank’s on-site health and wellness centers.

Wells Fargo

A Wells Fargo spokesperson confirmed to Insider that all workers who go into the bank are required to complete a self-screening assessment, which involves filling out a questionnaire about whether they have symptoms or have been exposed to COVID-19. They must complete this every day before entering the workplace, the spokesperson said.

In its largest US locations, the bank has an on-site nurse to check staff for COVID-19 symptoms and refer them for testing.

Credit Suisse

Sources familiar with the situation at Swiss bank Credit Suisse said it is offering its staff in London weekly testing, despite only a small number of them coming into the workplace. Credit Suisse declined to comment.

Citibank and Barclays could not be reached for comment. HSBC didn’t respond to Insider’s request for comment.

Are you an employee in the banking sector being tested for COVID-19 on a daily basis? Get in touch with this reporter via email: kduffy@insider.com.

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Square gets a street-high $330 price target from Deutsche Bank on Cash App stimulus potential

jack dorsey
Jack Dorsey Square’s Co-founder.

Square received a street-high $330 price target from Deutsche Bank on Wednesday ahead of the company’s February 23 earnings date.

Analysts at Deutsche Bank, led by Brian Keane, said Square may have been a “recovery play in 2020,” but the “bigger recovery story” is set to come in 2021.

Square is a financial services and mobile payments firm that was founded in 2009 by Jim McKelvey and Twitter’s Jack Dorsey. The company’s stock has risen more than 220% over the past year as its flagship product, Cash App, blossomed due in large part to stimulus checks and the stay-at-home audience.

Deutsche Bank’s Brian Keane said another round of stimulus checks might be a significant win for Cash App in a note to clients on Wednesday.

“Although benefits from the first round of stimulus have started to fade, Cash App should benefit from the second smaller round starting in 1Q21,” Keane said.

The analyst also said his team expects “Cash App to benefit from monetizing new users, cross-selling products across the platform, and expansion into new products” throughout the year, but sees gross profit growth falling.

While some analysts and investors have been worried about Cash App’s profit potential, Deutsche Bank analysts said they “expect margins” for the all-important business sector “to scale over time.”

Deutsche Bank analysts also noted the benefit Square’s stock brokerage products have had on the top line. The company added 2.5 million transacting customers since its launch less than a year ago as of the end of the third quarter. 

The record surge in the price of bitcoin has been “a boon” for Square’s revenue and gross profits as well.

The company made headlines back in 2017 when it started allowing cryptocurrency trading through its Cash App. And more recently Square bought $50 million worth of bitcoin in an investment that has already paid big dividends for the company.

Deutsche Bank’s Keane said he raised his fourth-quarter “Total Net Revenue growth” forecast to “~140% Y/Y primarily due to higher Bitcoin revenue.”

However, the analysts added that they are “lowering our Gross Profit growth from ~55% Y/Y to ~48% Y/Y due to the lower Seller volumes and Cash App Gross Profit growth.”

Deutche Bank is forecasting net revenues of $9.49 billion when Square reports earnings on Feb 23 vs. consensus estimates of $9.51 billion. And the firm expects net income of $118 million vs. a $94 million consensus estimate.

Square traded down 1.86% on Wednesday as of 3:44 PM ET, at $270.80, giving the company a market cap of $122.08 billion.

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All the businesses cutting ties with the Trump Organization

trump thanksgiving
Former President Donald Trump.

  • After the insurrection at the Capitol, some entities severed ties with Trump and his business.
  • Several prominent business leaders spoke out against the riot.
  • Deutsche Bank, Aon, Cushman & Wakefield, and even New York City moved to cut ties.
  • Visit Business Insider’s homepage for more stories.

In the weeks since early January’s violent insurrection at the Capitol by a pro-Trump mob, some businesses are cutting ties with the Trump Organization.

On January 6, the Capitol went into lockdown as thousands of President Donald Trump’s supporters descended upon the building, resulting in chaos, damage, and violence. At least five people have died.

In the wake of the riot, politicians – including Republican House Minority Leader Kevin McCarthy – spoke out about the responsibility that the president bears for inciting violence. Prominent business leaders, including Apple CEO Tim Cook and Google CEO Sundar Pichai, also spoke out against the siege. Business Roundtable released a statement calling on the president to “put an end to the chaos.”

Platforms including Twitter and Facebook moved to ban the president’s accounts. Twitter CEO Jack Dorsey broke his silence on the ban last night, saying it set a “dangerous precedent.” And, as Deadline reports, the outgoing president was soon facing expulsion from the performing arts union SAG-AFTRA (although he’d still receive his pension of over $90,000); he resigned instead of accept expulsion.

In a historic vote, Trump became the first president to be impeached by congress twice. If he’s convicted by the senate (a move that requires a two-thirds majority), it can vote on whether to bar him from holding office again.

But some actions have gone beyond statements: Businesses and other entities are severing their financial connections to Trump and the Trump Organization. 

In the wake of the insurrection and impeachment, some groups formerly affiliated with the Trump Organization are opting to sever ties. The Trump Organization did not immediately respond to Insider’s request for comment.

Here are all the businesses and entities that have publicly split from the Trump Organization.

SAG-AFTRA planned on holding a hearing on whether to expel Donald Trump from the labor group – but he resigned in a pointed letter.

Trump The Apprentice

On February 4, Trump sent in a resignation letter addressed to SAG-AFTRA union President Gabrielle Carteris.

“I write to you today regarding the so-called Disciplinary Committee hearing aimed at revoking my union membership,” Trump wrote.”Who cares!”

He went on to say he was “not familiar with your work” but that he’s proud of his own performances in movies such as “Home Alone 2” and “Zoolander” and television shows including “Saturday Night Live” and “The Apprentice.”

He closed his letter with: “I no longer wish to be associated with your union. As such, this letter is to inform you of my immediate resignation from SAG-AFTRA. You have done nothing for me.”

In response, SAG-AFTRA released a two-word statement: “Thank you.”

New York City is ending its contracts with the Trump Organization.

donald trump and fred trump
Donald and Fred Trump at the opening of the Wollman Rink on November 6, 1987.

New York Mayor Bill de Blasio said on Wednesday that New York City “will no longer have anything to do with the Trump Organization.”

Insider’s Grace Dean reported that the city had contracts with the Trump Organization to run two ice-skating rinks (and a carousel) in Central Park, as well as a golf course in the Bronx.

The Washington Post reported those contracts brought in $17 million in annual revenue for the Trump Organization.

The PGA pulled its 2022 championship from Trump’s Bedminster, New Jersey, golf club.

trump golfing
Trump at the Trump National Golf Club in Sterling, Virginia, on November 21.

Insider’s Julie Gerstein reported the decision came after last week’s insurrection; board members voted to pull the plug. 

In a statement to The Washington Post, the Trump Organization said it was “a breach of a binding contract and they have no right to terminate the agreement.”

Trump was more upset about no longer hosting the tournament than getting impeached for a second time, The New York Times’ Maggie Haberman reported.

Deutsche Bank and Signature Bank are reportedly ending their banking services for the Trump Organization.

Deutsche Bank
Germany’s Deutsche Bank in Frankfurt.

Bloomberg reported on Monday that both banks were severing ties. In a statement to Bloomberg, Signature said, “We believe the appropriate action would be the resignation of the president of the United States.”

According to the Bloomberg report, Trump owes Deutsche Bank over $300 million, and Signature Bank will close two personal accounts with about $5.3 million in them.

Professional Bank won’t provide services for Trump or the Trump Organization.

trump wind
Trump borrowed $11 million from the bank in May 2018.

“Professional Bank has decided not to engage in any further business with the Trump Organization and its affiliates, and will be winding down the relationship effective immediately,” the bank said in a statement to Bloomberg on Tuesday.

Bloomberg reported Trump borrowed $11 million from the bank in May 2018 to buy a home for his sister Maryanne Trump Barry next to his Mar-a-Lago club in Florida.

Insider’s Kate Duffy reported Trump had a money-market account with the bank worth as much as $25 million.

The Girl Scouts want to end their lease in a Trump building.

Trump Building
The Trump Building.

The Girl Scouts’ New York chapter told Insider’s Daniel Geiger that the organization was trying to get out of a 15-year lease at 40 Wall St., which is known as the Trump Building.

The real-estate giant Cushman & Wakefield will no longer do business with the Trump Organization.

trump tower
A guard outside Trump Tower on Fifth Avenue in Manhattan on August 24, 2018.

The firm was an agent for Trump Tower and 40 Wall St.

“Cushman & Wakefield has made the decision to no longer do business with The Trump Organization,” a spokesman said in a statement to Insider.

Curbed reported last week that the real-estate brokerage JLL was no longer involved in marketing the Trump hotel in Washington, though it’s not clear when the brokerage backed out.

Shopify closed the Trump Organization’s store.

Shopify app phone
The Shopify app.

Vox reported on January 7 that Shopify closed both the Trump Organization’s store and the e-commerce section of Trump’s election website.

The insurance brokerage Aon has ended its relationship with the Trump Organization.

michael cohen donald trump regular
The insurer was subpoenaed in 2019 after Michael Cohen said Trump inflated the value of his assets.

Bloomberg first reported on Wednesday the insurer had cut ties with the Trump Organization. 

Aon was subpoenaed in 2019 by New York’s financial regulator over Michael Cohen’s allegation that Trump had inflated the value of his assets.

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