KBW Examines Mobile Payments’ Recent Past and Near-Term Future

January 10, 2019         By: Steven Anderson

We haven’t heard out of Keefe, Bruyette and Woods (KBW) in a while, so it’s not much of a surprise to see word finally arrive from them. And they brought out a doozy with their latest word too, taking a look back at the fourth quarter of 2018 and a look at head to the first quarter of 2019.

The biggest issue that KBW can see going forward is what it calls “macro uncertainty.” Basically, there are a lot of balls in the air, from Brexit to ongoing issues in the US economy and political outlook to potential trouble brewing in China and beyond. Much of this will likely have some kind of destabilizing effect, but to what extent and in which direction is unclear. However, on the plus side, KBW projects that 2019 will be more stable overall than 2018 was, a departure from what some expect out of this year.

Some downside has already been baked in, and the stock prices won’t fluctuate much as a result. WEX, for example, may have some significant downside, despite earlier word from Mizuho suggesting that WEX will be one to watch in 2019 for upside potential. Additionally, watch for mergers and acquisitions (M&A) to be a major factor in growth in 2019, as more companies start to connect to better pursue market share.

The future, meanwhile, notes that consumer finance stocks are trading well under historical price / earnings ratios, which is actually more severe than KBW calls for. KBW also looks for the Fed to slow down on rate hikes–considering how many have hit and how often President Trump has decried the Fed for doing just that, it’s a distinct possibility–and for the future economic outlook to be slightly weaker than 2018.

All reasonable predictions, though many if not all of them may be proven invalid by the end of the year. One point is absolutely clear, however, and that’s that volatility is the watchword of 2019. The whole economy could be up one day and cratered another. Trying to make predictions in this environment is like throwing darts at fog hoping to hit something solid.

Still, in the end, the KBW report represents a set of unusual conclusions, and will make for some interesting watching as 2019 unfolds.