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Will a falling SP500 bring down already low sectors like banking with it?
Posted on 5/13/20 at 2:27 pm
Posted on 5/13/20 at 2:27 pm
For example, banking as well as some industrials are still at or below the prior March low. If an overbought sector like technology begins to fall from the fast rebound it made, will a falling SP 500 bring banking and other already low stocks down another 20-30% along with it? Or is there an element of safety by being in stocks that never made a recovery and are still at their lows?
This post was edited on 5/13/20 at 3:15 pm
5
Posted on 5/13/20 at 2:50 pm to MillerLiteTime
I don't think they've hit bottom but I do like big banks as a buy long term. They have so much capital on hand now as a result of 2008 that the downside risk of going to 0 is minimal. I love JPM long if it breaks 80.
Posted on 5/13/20 at 3:05 pm to truthbetold
I'm heavily in banking right now and also like them as a long term play. I continued buying even more today. But I will admit that I did not expect today's losses in the 7-8% range for stocks like Wells Fargo and US Bancorp. They have hovered around the March lows for 6 weeks or so with only mild losses and gains, but the extreme selloff today caught me off guard. I just wonder how bad it could get the more it appears like that March low is not going to hold.
Posted on 5/13/20 at 3:20 pm to truthbetold
quote:
I do like big banks as a buy long term. They have so much capital on hand now as a result of 2008 that the downside risk of going to 0 is minimal
100% agree, went long on banks early and bought some more today.
I wouldn’t expect a quick return but I believe big banks are about as safe an investment that you can make in the market at this point.
Posted on 5/13/20 at 3:23 pm to MillerLiteTime
I agree with the sentiment hear that banks are very safe. However, I expect them to languish for the next 18 to 24 months.
Posted on 5/13/20 at 5:22 pm to MillerLiteTime
You guys in the big banks should have short exposure to the regional banks as a hedge. Very brave TBH considering we're in a deflationary envrionment and continued ZIRP/NIRP for the forseeable future (could be decades). The Feds are going to turn them into a pseudo government utility this coming decade with more regulation, taxes and restrictions on lending like they did in the EU. There would have to be a cultural change in our banking system that incentivizes risk taking in the real economy which means less regulation and lower taxes and a healthy consumer, all very unlikely in the short and mid term.
Posted on 5/13/20 at 6:32 pm to wutangfinancial
I do agree we are headed towards a quasi based economy. Not only in the banking but in all sectors.
Posted on 5/13/20 at 7:05 pm to Shepherd88
I'll bet we have drastic changes to large corporations including some sort of reserve requirement to limit the debt and risk taking. The only way out is a culture change but we aren't getting out of this government trap without succession. We are way too fragile and content to ever build an economy without paternal regulations.
Posted on 5/13/20 at 7:11 pm to wutangfinancial
At these rates.......I am out. However, for some reason I think buying an insurance company at these rates is a good idea.
Posted on 5/13/20 at 7:31 pm to Janky
Dude, no way. Please think about that for a minute. Insurance companies have been searching for yield in more and more exotic ways just like the pensions. This and solvency issues in the non-financial corporate sector with many more defaults and downgrades on the horizon. Exactly what insurance are you looking at exposure to?
Posted on 5/13/20 at 7:43 pm to MillerLiteTime
quote:
will a falling SP 500 bring banking and other already low stocks down another 20-30% along with it?
If it’s the S&P you’re talking about, the answer is most likely “yes.” Financials are about 14% of the index so you’d expect them to be falling if the index is falling.
Posted on 5/13/20 at 7:47 pm to MillerLiteTime
quote:
Or is there an element of safety by being in stocks that never made a recovery and are still at their lows?
Recall also that price is only half the story. A stock can stay flat while becoming more expensive if it’s underlying earnings are decreasing. Sure, financials may not have participated in the rally as much, but they’re also in an industry where the benchmark rate on their underlying product (money) has collapsed and could even go negative. So even if their price is flat while other sectors have appreciated, they could be becoming more expensive all the same.
Posted on 5/22/20 at 1:34 pm to truthbetold
quote:
I love JPM long if it breaks 80.
Same here. Sold some June 79 puts. If they hit, I'm happy. If they don't hit, I'm happy.
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