Insider Q&A: KBW research head Cannon on rates, banks

Frederick Cannon, global director of research and chief equity strategist at Keefe, Bruyette & Woods, sees both good and bad news for banks in the current environment and some potential bright spots for investors.

For the banking system, the Fed rate rise may have been "be careful what you ask for."

With the recent economic anxiety and market turmoil, Fed Chair Janet Yellen now is saying the pace of Fed interest-rate increases could slow.

[...] we're in a situation where certainly players in the market are thinking, "Well the Fed isn't going to raise rates much more, that means we don't get a benefit there, and it certainly looks like credit costs are going to go higher, even if they're not going to go a lot higher."

One of the sectors that performed horribly last year is the mortgage REITS (real estate investment trusts).

[...] if interest rates are really going to stay at these low levels and the Fed isn't going to be raising rates, the strong yields on mortgage REITS where investors can earn 8 to 12 percent dividends are starting to look more appealing.