US Bank Stocks are Good Bets, if Patient

US Bank Stocks are Good Bets, if Patient

#bank #stocks #investor #patience #BullMarket


Investors in banks will have to be patient.“– Paul Ebeling

The US bank sector has been hammered this year, but patient investors hunting for bargains will find them a good bet.

Banks are very sensitive to low interest rates, economic recovery and the aid/relief/stimulus outlook.

The S&P 500 Bank subsector, which kicks off its Q-3 earnings season on 13 October was last down 33.7% YTD compared with a 5.8% gainer for the S&P 500 index.

JPMorgan and Citigroup Inc will start the Q-3 earnings season on Tuesday, 13 October followed by Wells Fargo and Goldman Sachs and Bank of America Corp Wednesday.

Banks have been a drag on the broader S&P financial index that its 19% YTD decliner is 2nd to energy’s 49.9% drop among the S&P 11 major sectors.

If Congress reach an agreement with President Trump, a new fiscal aid/relief/stimulus package will help banks if it boosts US loan growth, interest rates and economic activity.

Now, the bank index is up 12% from its intraday bottom on 2 September to a high on 6 October, as yields for longer-dated US treasuries have risen with stimulus expectations; banks profit from higher interest rates.

But many investors are unconvinced that recent gains will be sustainable as The Trump Fed has signaled plans to keep overnight rates low for the foreseeable future in order to aid an economic recovery which is happening now.

Banks were outperforming the market Thursday and Friday on renewed expectation for stimulus pact after President Trump said that there was a good chance of a deal and he wanted to make it.

As of the close Friday there was no deal although House Speaker Nancy Pelosi (D-CA) and Treasury Secretary Steven Mnuchin are continuing with talks.

The stimulus would be “a good first step towards a better environment for banks to generate Top-line and bottom-line growth, with that happening the financial sector will be a leader of the next leg of this Bull market, as the sector will make a full recovery.

Friday, the major US stock market indexes finished at: DJIA +161.39 at 28586.84, NAS Comp +158.96 at 11579.87, S&P +30.31 at 3477.13

Volume: Trade on the NYSE came in at 851-M/shares exchanged.

HeffX-LTN’s overall technical outlook for the major US stock market indexes is Bullish with a Very Bullish bias for the week ended 9 October 2020.

  • NAS Comp +29.1% YTD
  • S&P 500 +7.6% YTD
  • DJIA +0.2% YTD
  • Russell 2000 -1.9% YTD

Looking Ahead: Investors will not receive any notable data Monday.

Have a healthy holiday weekend, Keep the Faith!

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Paul Ebeling

Paul A. Ebeling, a polymath, excels, in diverse fields of knowledge Including Pattern Recognition Analysis in Equities, Commodities and Foreign Exchange, and he it the author of "The Red Roadmaster's Technical Report on the US Major Market Indices, a highly regarded, weekly financial market commentary. He is a philosopher, issuing insights on a wide range of subjects to over a million cohorts. An international audience of opinion makers, business leaders, and global organizations recognize Ebeling as an expert.