Morning Comment: Can the Banks FINALLY Outperform?


  • We have been cautious on the banks since early Dec 2016
  • They're flat since then...vs. a more than 34% rally in the S&P 500
  • However, this could change IF two technical moves take place


One month after the 2016 election, we turned negative on the bank stocks. They had rallied a whopping 30% over that one-month period…on the expectations that the President-elect would deregulate the industry in a way that would be very bullish for the group. The problem was that the group had already rallied 28% before the 2016 election, so we believed that the 66% rally in the group from early February to early December that year more than priced-in any positive news on the regulatory side of the equation. Therefore, we turned bearish on the group.

Over the next 34 months, we maintained our cautious stance due to the steady decline in interest rates and the continued flattening of the yield curve. We also never saw anything compelling in the charts that told us the group would finally begin to out-perform the S&P 500. Sure enough, since December 5th of 2016 (one month after the election), the KBE bank ETF has seen a net move of less than 1%...while the S&P 500 has rallied more than 34%!!! In other words, although the bank group has had very short-term periods when it out-performed, it has badly under-performed since we turned negative on the group in early December of that year.

Yes, some individual names (especially big names like JPM) have done very well, but as a group, they have continued to underperform this year. HOWEVER, this could all change if the KBE and the yield on the 10yr note can break above their key resistance levels.

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Matthew J. Maley

Managing Director

Chief Market Strategist

Miller Tabak + Co., LLC

Founder The Maley Report

TheMaleyReport.com

275 Grove St. Suite 2-400

Newton, MA 02466

617-663-5381

mmaley@millertabak.com


Although the information contained in this report (not including disclosures contained herein) has been obtained from sources we believe to be reliable, the accuracy and completeness of such information and the opinions expressed herein cannot be guaranteed. This report is for informational purposes only and under no circumstances is it to be construed as an offer to sell, or a solicitation to buy, any security. Any recommendation contained in this report may not be appropriate for all investors. Trading options is not suitable for all investors and may involve risk of loss. Additional information is available upon request or by contacting us at Miller Tabak + Co., LLC, 200 Park Ave. Suite 1700, New York, NY 10166.

Posted to The Maley Report on Sep 26, 2019 — 8:09 AM
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