Wall Street faces a capital reform that divides its major banksDow Jones Industrial Cash IndexACTIVTRADES:USAINDActivTradesIon Jauregui – Analyst at ActivTrades Wall Street’s financial giants are facing a reform of capital rules that will not distribute its benefits evenly. Goldman Sachs and Morgan Stanley could emerge as beneficiaries, while JPMorgan would face a less comfortable position. The proposal by U.S. regulators would reduce capital requirements for major banks by around 4.8% and could free up as much as $320 billion across the financial system. That capital could be used for new operations, lending, dividends or share buybacks. The problem is that the impact will depend on each bank’s business model. Goldman Sachs and Morgan Stanley, with greater exposure to market activities and wholesale funding, could benefit from changes in the way their capital surcharges are calculated. Estimates suggest that each could obtain between $1 billion and $2 billion in additional capital relief. JPMorgan, by contrast, could find itself in a less favorable position. Its structure, which relies more heavily on deposits and traditional banking, means that some of the proposed changes would have a different impact. Estimates point to around $13 billion less in capital relief than it initially expected. The difference is important for shareholders: the less capital a bank needs to keep tied up to comply with regulation, the greater its potential flexibility to use it for growth or return it through dividends and share buybacks. And this is where the reform becomes relevant for the Dow Jones, because Goldman Sachs, Morgan Stanley and JPMorgan are all components of the index. In European trading hours, the Dow Jones is trading around 43,678 points, maintaining a long-term upward trend, although it is currently in a consolidation phase. The price is finding support around the 50- and 100-session moving averages, while the 200-session moving average remains a key reference for the broader trend. The Point of Control (POC) stands at 52,254.30 points, within the volume area associated with the move that subsequently took the index to 54,795.85 points. The distance between these levels shows the depth of the correction from the highs. The indicators are currently pointing toward stabilization. The RSI stands at 55.90%, having moved sideways over recent sessions, while the MACD shows a fading of the bearish trend, with the MACD line and signal line virtually flat. The technical key now lies in the Dow’s ability to hold the 50- and 100-session moving averages. As long as it does so, the long-term bullish structure remains intact. A recovery in momentum would bring the POC at 52,254.30 back into focus, followed by the 54,795.85 high. After so many years following the markets, I increasingly believe that a regulatory reform can change a company’s fundamentals, but it is the price that ultimately tells us whether the market considers that change positive or negative. In this case, Goldman Sachs and Morgan Stanley could turn lower capital requirements into greater returns for their shareholders, while JPMorgan faces the opposite challenge. And that divergence will be another variable the Dow Jones will have to absorb as it attempts to define its next move. ******************************************************************************************* The information provided does not constitute investment research. The material has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and such should be considered a marketing communication. All information has been prepared by ActivTrades ("AT"). The information does not contain a record of AT's prices, or an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. Any material provided does not have regard to the specific investment objective and financial situation of any person who may receive it. Past performance and forecasting are not a synonym of a reliable indicator of future performance. AT provides an execution-only service. Consequently, any person acting on the information provided does so at their own risk. Political risk is unpredictable. Central bank actions can vary. Platform tools do not guarantee success.