![]() ![]() (NYSE:BLK), Charles Schwab Corporation (NYSE:SCHW) and First Republic Bank (NYSE:FRC). How To Play It: In fact, Bank of America remains overweight on the financial sector and recommends high-quality stocks such as BlackRock, Inc. "While Bank earnings growth was 80% correlated with the 10Y/2Y spread from 1992 to March 2000, that correlation has dropped to just 17% following the Tech Bubble, and our Banks team has highlighted that the short end of the curve has become more important for Banks vs. The good news for bank stock investors, according to Bank of America analyst Savita Subramanian, is that investors don't need to be afraid of financial stocks if the yield curve inverts. Therefore, an inverted yield curve pressures bank margins and profitability. ![]() Banks typically profit by borrowing money in the short-term and lending it in the long-term. In other words, the stock market has historically peaked well after previous yield curve inversions, suggesting there may still be some upside to the SPDR S&P 500 ETF Trust (NYSE:SPY) if the curve inverts.īank stocks have historically performed poorly during periods of inverted yield curves. ![]()
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