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Bank Stocks: Perpetual Bears or Emerging Bulls?
A Carson Medlin Research Whitepaper
We are pleased to attach our research staff’s new whitepaper, “Bank Stocks: Perpetual Bears or Emerging Bulls?” This study uses comparative technical analysis to arrive at a rather surprising conclusion (at least we were surprised): the market for bank equities may be much closer to returning to favorable, bullish conditions than most observers expect. In fact, we may already be in the early stages of the next sustained, long-term bank stock bull market.
Given the overwhelming negativity surrounding most banks and their stocks, ours may not be a view that is widely shared. And we understand that ours is only one type of analysis, and that the past doesn’t necessarily predict the future. On the other hand, human history has a way of repeating itself. Here is a quote from a New York Times article entitled, “Market Place: Bank Stocks Emit Ominous Signals”:
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“The severe drop in bank issues over the last year suggests that the overall market is likely to sink further in coming months…[Investors] don’t have confidence that the banks’ assets are worth what they’re carrying them for on the books.”
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Sound familiar? This article ran on September 25, 1990, and, as you will see in the attached whitepaper, it preceded by just one month the start of the great 7-year bank bull market of the 1990s, when the NASDAQ Bank Index increased by more than 800%.
Just in case we are right on this one, we are preparing some follow-up analysis on how rising bank valuations might affect the industry, including capital planning and consolidation. We will also have suggestions on how your bank’s strategic plan might be updated to reflect a new reality. We will send the follow-up as soon as it is ready. In the meantime, please call with any comments or questions.
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