In general yes, higher rates do help banks. But in reality, banks just transform liquidity from the short-term towards the mid-term. They take deposits at 0.2% and issue 3-year loans at 5%.I.e. banks need a relatively steep yield curve. To that effect – see how the Banks stocks index is negatively correlated with the slope of the US Yield curve. The Fed’s being so late to raising rates would succeed in flattening the yield curve. Given how late into this cycle we are, bank stocks would struggle with high-cost inflation and the flattening yield curve.
The evidence of the global economy being solidly in the late-cycle:
- unemployment of 3.8% – the lowest in decades
- commodities are ripping as if we are entering late-cycle tightness
- the inflation of ~8%