Bank stocks break out, tech declines, and it’s a big deal for market

Advisors


Michael Nagle | Bloomberg | Getty Images

Pedestrians walk along Wall Street near the New York Stock Exchange in New York, Aug. 14, 2017.

Why? Because everyone who would’ve, could’ve and should’ve exited the sector has already done so. The sellers who were just looking to get back to even are gone.

No stock market sector was hit harder than financials during the last recession. Let’s recall the names of companies that are no longer around but once were iconic American institutions: Lehman Brothers, Bear Stearns, Wachovia (absorbed by Wells Fargo) and Washington Mutual (absorbed by J.P. Morgan). And the ones that needed a bailout or part of a government-orchestrated takeover: Merrill Lynch (Bank of America) and AIG.

On a split adjusted basis, Citigroup is still down about 85 percent from its prerecession level. You may recall that it did a 1-for-10 reverse split after the recession. So even though it is up more than 25 percent year-to-date, it would have to rise by another 600 percent to get back to its old high.

More from Smart Investing:
The big stabilizer the market will lose when Yellen leaves the Fed
ETFs are becoming the go-to investment option for advisors
Investors are pouring money into the cybersecurity sector

Sector exchange-traded funds such as the Financial Select Sector SPDR Financial (XLF) and iShares Dow Jones US Regional Banks (IAT), understandably, were decimated, kind of like the NASDAQ Composite was decimated in the year 2000. Not only did the NASDAQ fully recover, it has gone on to set fresh new record highs over the last two and a half years. XLF and IAT are just a few percentage points away from reaching their pre-recession all-time highs. It took, so far, more than 10 years to happen. That’s a long time to wait to get back to even.

The financials look like they’re playing by the same book as the NASDAQ.



Source link

Products You May Like

Articles You May Like

Alphabet Q1 earnings preview changes
Textron profit soars, agrees to sell tools business to Emerson
American Express earnings Q1 2018
Male sexual enhancement supplement recalled for containing actual drugs
One classic theory could be hinting at a short-term drop for stocks

Leave a Reply

Your email address will not be published. Required fields are marked *