2 Big Bank Stocks To Buy For The Coming Economic Recovery

Bank stocks have not been part of the recent market rally. That’s likely to change when the pandemic is finally behind us. And these two big banks should thrive.

The market is absolutely booming. All three major market indexes just made new all-time highs. That seems strange. Aren’t we in the grips of a global pandemic that’s getting worse? What is it that the stock market seems to love about this Godforsaken year?

For one, the indexes are misleading. Take the S&P 500, for example. Five large technology stocks comprise what are collectively known as the FAANG stocks. Those are Facebook (FB), Amazon (AMZN), Apple (AAPL), Netflix (NFLX), and Alphabet, formerly Google (GOOG). These five technology goliaths represent more than 20% of the index and are up an average of 45% YTD.

Because the S&P 500 is cap-weighted and these companies have grown so large, they represent a disproportionate share of the index. While these five stocks comprise well over 20% of an index of 500 stocks, the entire energy sector accounts for less than 3%.

And the technology industry is thriving during the pandemic as people rely on technology more than ever while locked down in their homes. The technology-laden Nasdaq index is up 33% YTD.

But the market indexes don’t tell the full story.

Bank Stocks, Energy Sector Lagging

Many sectors are languishing. Stock performance in those sectors reflects the fact that the world is in the midst of a pandemic. For example, the energy sector is down over 40% for the year. Bank stocks are 12% lower for the year. These are cyclical sectors that are more affected by the real, Main Street economy, which has been severely disrupted by the lockdowns.

These sectors will require a more full recovery to rebound. While the economic recovery has outperformed expectations so far, it still has one arm tied behind its back with the restrictions that still remain.

But those downtrodden sectors got a huge shot of adrenaline this month as several promising vaccines appear on the verge of distribution. On the day of the first vaccine announcement by Pfizer (PFE), the KBW Nasdaq Bank Index soared more than 13%. The KBW Regional Bank Index jumped 16%. And those are indexes, in just one day.

1 2 3
View single page >> |
How did you like this article? Let us know so we can better customize your reading experience.


Leave a comment to automatically be entered into our contest to win a free Echo Show.