Bargain hunters are swirling around beaten-down shares of U.S. banks, even as skeptical investors say the sector's problems are likely to persist for some time. The S&P 500 bank index is down around 11% in 2023, a year that began with the failure of Silicon Valley Bank and...
Bargain hunters are swirling around beaten-down shares of U.S. banks, even as skeptical investors say the sector’s problems are likely to persist for some time. The S&P 500 bank index is down around 11% in 2023, a year that began with the failure of Silicon Valley Bank and several other lenders in the worst banking crisis since 2008. The broader S&P 500, by contrast, is up around 15%.
One key factor for bank stocks is whether the Federal Reserve is close to wrapping up a monetary tightening cycle that has brought the highest U.S. interest rates in decades. This month, analysts at BofA Global Research said investors should “selectively” add exposure to bank stocks in anticipation of an interest rate peak. Most risks to the sector stem from higher rates, they said, including margin pressure due to rising deposit costs and problems with commercial real estate.
Javeri believes larger banks have significantly cut costs and are poised to raise dividends and increase buybacks, helping them weather a period of slower loan growth.Investors are awaiting U.S. consumer price data next week, for a glimpse of how the Fed is faring in its fight to keep lowering inflation from last year’s multi-decade highs. A sharper than expected fall could bolster the case for the central bank to cut rates sooner.Historically high mortgage rates have weighed on lending.
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