US Bank Stocks At Their Cheapest Since 2009

US Bank Stocks At Their Cheapest Since 2009

almost 4 years ago2 mins

Mentioned in story

Pennywise investors may be attracted by big financial stocks’ depressed valuations, which appear to be overestimating the effects of coronavirus. But then again, as Friday’s hit to recovering oil prices proves, there’s always a risk that complacency sees your fortunes sucked down the drain… 🤡

What does this mean?

US bank and insurance shares have fallen 30% this year, with a failure to participate in the S&P 500’s post-March bounceback leaving the sector 20 percentage points adrift – its worst performance ever.

But while analysts expect earnings to take a knock, some think the scale of the selloff – with $1 trillion of lost market value rivaling the dark days of 2008 – is overdone. Banks have taken pains to significantly shore up their finances since then, and the nature of the current crisis means it’s unlikely to cause another eight straight quarters of declining profits.

Article Image

Financial stocks were quick to rally after the last three “bear markets”. This time, however, investors may be worried about more than just an increase in loan defaults. The US central bank may follow the UK’s lead in demanding belt-tightening cuts to company dividends – and, most controversially of all, the specter of profit-pinching, European-style negative target interest rates remains looming in the background 👻

Why should I care?

Despite big banks recently suspending juicy share buyback programs, analysts from BlackRock and KBW think the threat to financial dividends is generally overblown – with Wells Fargo and Goldman Sachs among the 10% of more doubtful cases. While much depends on next month’s “stress tests”, buying US bank stocks may be a good-value way to back economic recovery: compared to the overall S&P 500, they’re currently the cheapest since 2009 😳

Investors elsewhere may, indeed, be feeling optimistic about that recovery. Energy is the only sector to have performed worse than banks in 2020; despite falling on Friday, however, the price of oil has now risen for four consecutive weeks as Chinese demand reportedly reaches 90% of pre-virus levels. Hedge fund Andurand, fresh from its hugely successful bet on oil’s spectacular crash, is predicting further increases…

Article Image
Finimize

BECOME A SMARTER INVESTOR

All the daily investing news and insights you need in one subscription.

Disclaimer: These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment advisor.

/3 Your free quarterly content is about to expire. Uncover the biggest trends and opportunities. Subscribe now for 50%. Cancel anytime.

Finimize
© Finimize Ltd. 2023. 10328011. 280 Bishopsgate, London, EC2M 4AG