News Although the Dow fell on Tuesday (May 19), CFRA chief investment strategist Sam Stovall said that if the market continues to rebound, the rebound of financial stocks may be a good sign for the entire stock market.
The financial sector is like an early warning signal for the economy. Since the March low, financial stocks have been lagging behind the broader market and all other sectors except consumer necessities. Since March 23, they have only risen by 25%, while the S & P 500 index has risen by 33%. Financial stocks were also about 29% lower than the January high, only lagging behind energy, which was 38% from the 52-week high set in July.
Sam Stovall, CFRA ’s chief investment strategist, said: “I think banks’ overall rebound is good. Generally, the financial industry, especially banks, because unless banks lend money, the economy cannot actually grow. If you continue to rebound, financial The rebound in stocks may be a good sign for the entire stock market. "
The financial sector is like an early warning signal for the economy. Since the March low, stocks have been lagging behind the broader market and all other sectors except consumer necessities. Since March 23, they have only risen by 25%, while the S & P 500 index has risen by 33%. Financial stocks are also about 29% lower than the January high.
On Monday, after the bank surged, Fed chief Powell said the Fed can do more to help the economy recover. With optimism about the potential coronavirus vaccine, banks also moved higher with the broader market, and the vaccine showed good results in early trials. The financial sector rose 5.3% on Monday, the third largest sector after the energy and industrial sectors.
Wells Fargo analyst Mike Mayo said there was also good news when Warren Buffett ’s Berkshire Hathaway revealed that despite selling most of the long-term shares held by Goldman Sachs, But the bank continued to hold large amounts of bank stocks. And sold some JPMorgan Chase stock.
Mike Mayo pointed out that Buffett still holds shares in Bank of America, Bank of New York Mellon and M & T Bank. For short-term investors, if the 10-year Treasury yield rises to 1.25%, as Wells Fargo predicts, by the end of the year. With the 10-year Treasury yields rose slightly to 0.72%.
Fed Vice Chairman Lan Randal Quarles told the Senate Banking Committee last week that the Fed ’s stress test this summer will determine whether banks can continue to pay dividends. The expected results will be available at the end of June.
Sam Stovall said: "If growth does rebound with the reopening, as the market expects, it will be good for bank stocks. If they do well, they have the ability to obtain and increase dividends. Currently, the earnings look very good Alluring. "