Visits: 11
So much for the rally. On Thursday, the S&P 500 got within 2.4 percent of its historic high only to tumble on Friday. We got mugged by slower global growth again.
Equity Residential, Essex Property, Kimco, Mid-America Apartment Communities) and utilities (NextEra, American Electric Power, Exelon, Xcel).
This week, consumer stocks (Merck, Procter & Gamble, General Mills, Kimberly-Clark, Mondelez) have joined the crowd. It’s a defensively-priced new high list.
Regional banks are getting clobbered. Fifth Third is down 11 percent, Comerica is down 9.7 percent, KeyCorp is down 9.6 percent and Huntington Bancshares is down 9.3 percent.
While many worry about how a flat yield curve affects banking business, for most regional banks short-term interest rates are the most important determinant, and with 2-year yields essentially at their lowest levels in 12 months, that’s a problem.
A bank’s loan book would typically consist of a mix of commercial & industrial loans, most of which are tied to a shorter-term variable rate. Fixed-rate loans like auto loans are also tied to medium and shorter-term rates. Mortgage loans are tied to longer term instruments like the 10-year, but they are typically only 20 percent of the book of most regional banks.
Bottom line: Low rates are both a blessing and a curse for investors.