Still waiting for banks to come around, huh?
The Financial sector has had a rough go of it lately; afflicted with lawsuits, a perpetually low rate environment, and lowered earnings expectations. With that said it’s probably not as surprising to know that one of the biggest fake-outs of 2015 was the failed hype of buying banks on expected rate-hikes going into 2016.
It’s not all bad though with successful stress tests allowing for dividend increases and share buybacks for most US banks. European banks still pose a major issue for this sector and names like Deutsche Bank, Credit Suisse and Santander are trading close to 52-week lows.
Although earnings for the big banks have all been revised lower, we’ve seen positive reactions post earnings from Citigroup, Bank of America and JP Morgan.
Options orderflow hasn’t really been clear on this sector either. Towards the end of June we saw substantial put buying as mainstream media promoted doomsday scenarios for European banks.
With put option flow subsiding and markets running into all-time territory, the squeeze wasn’t too far behind and we’ve already seen Goldman Sachs make an amazing recovery from its lows over the past few weeks.
It’s been made abundantly clear to those paying attention that low-rates are here to stay for the foreseeable future.
Fundamentally, where is the growth in this industry really going to come from?
Until we see options flow pointing towards heavy rotations by institutions into this sector, I’d be a seller of rallies.
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