One of the most rattling aspects of this year’s market movement has to be the weakness of the bank stocks. No one can agree about why they’re selling off (oil? dollar? rates? the economy? regulation?) but, as my friend Jon Krinsky at MKM Partners reminds us, the Why isn’t as important as the What.
Here’s the What, as it pertains to US banks…
The top pane of his chart shows the KBW Banking Index, the bottom one shows it relative to the S&P 500. It’s a breakdown, and sentiment gets really sour when banks are breaking down relative to everything else.
Krinsky notes that this weakness is being echoed across the Atlantic and Pacific as both European and Japanese banks act worse than their respective markets.
Or perhaps more likely, our banks are echoing them.
Bank stocks still a concern; European CDS breaking out
MKM Partners – February 2nd 2016