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Bank Stocks - What to look for

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(@dhtaylor)
Noble Member Admin
Joined: 3 years ago
Posts: 1185
Topic starter  

A few of my friends are trying to get me to play these bank stocks so that they can piggy-back my runs.  However, there is a lot of risk still inherent in these bank stocks.  I always say that diversification is one of the best ways to go with risk.  In this case, the KRE ETF may be the way to play bank stocks if you are looking for something interesting to get into.  

Here is the latest chart on KRE ETF:

As you can see, the latest moves are dramatic.  But, this is an ETF with many bank stocks that are solid.  Nonetheless, the banking sector is still going to see challenges.  So, it is not a foregone conclusion that this ETF, via the bank stocks within it, will necessarily move higher.

First, what is going to happen next with interest rates:

After interest rates, you then need to consider the broader stock market:

Given this, if we see interest rates moderate - we have non-farm payrolls coming out just next Friday, the 7th - and if that shows much-needed moderation in the jobs outlook, then interest rates may moderate.  That could propel both the broader stock market higher, as well as bank stocks.  

I will be following this closely because it may be something interesting to get into come next week.  


   
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(@dhtaylor)
Noble Member Admin
Joined: 3 years ago
Posts: 1185
Topic starter  

My latest look at bank stocks just prior to non-farm payrolls and the potential opportunity if there is a significant move in jobs downward.  This would drop bond yields and there would be a small relief rally in the stock market.  However, dropping yields does not necessarily mean stocks go higher.  Instead, this could be a flight-to-quality that investors are selling stocks and going for protection in bonds.  

Let's see what the data tomorrow shows.


   
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