On Thursday investors were scrambling to determine just how serious the ripple might be after JP Morgan blind-sided the Street.
The bank said it may be facing legal losses that could total more than $4 billion with trading losses totaling $800 million in the second quarter.
Although CEO Jamie Dimon said, ‘just because we were stupid doesn’t mean everybody else was’ – immediately investors were wondering what developments meant for other banks.
According to the pros, one way to tell will be to watch the credit markets.
Dave Albrycht of Virtus Investment Partners tells us, “we’ll take a hard look at the CDS on Friday. But not just JPMorgan – all banks.”
“We’re going to evaluate and get our arms around it,” he says.
In other words, although it's safe to assume the spreads will increase, the degree to which they increase will be telling.
Whether they expand dramatically or only mildly, will be evaluated by pros - as clues to how concerned investors really are.