ReachX logo

How bank stocks may face further declines in 2019 (JPM, BAC, WFC, C)

Publication Date: 04 Dec 2018 - By Michael J. Kramer By Michael J. Kramer
Actionable
Differentiated

Macro Technical Analysis Equity Fundamental Thematic Equity USA Financial Services

Bank Stocks May Face Further Declines in 2019

To say the bank stocks have been a major disappoint in 2018 is a massive understatement. The group has not only been disappointing it has been nearly disastrous with as measured by the Financial Select Sector SPDR (XLF) which is now 12% off its 2018 highs double the S&P 500’s drop as of November 26. The bad news is that outlook for financials stock may get even worse in 2019 to due valuation and signs that yield curve may flatten further or possibly invert. It makes now an ideal time to either exit or even short big money center banks such as JPMorgan Chase & Co. (JPM), Bank of America Corp. (BAC), and Citigroup, Inc. (C)

There had been a lot of optimism banks stock would rise sharply in 2018 driven by significant share repurchases and a steeper yield curve driven by strong economic growth leading to a rise in inflation. Instead, the opposite has happened, the yield curve has flattened dramatically, and buybacks have been offset by stagnating revenue growth and slowing earnings growth. Based on present valuation, stocks such as JPMorgan and Bank of America may be as much 30% overvalued should their valuation return to their historical norms.

Warnings Signs

 

Unlock for 5 credits

 

Most read

ReachX
1-15 Clere Street, EC2A 4UY
London, United Kingdom
info@reachx.co
ReachX
1-15 Clere Street, EC2A 4UY
London, United Kingdom

info@reachx.co
Sign up to our newsletter