Bank Stocks Are On Their Longest Losing Streak Ever
S&P 500 Financials Index falls for 12th straight day
Bank stocks just hit a record -- a record of losses.
The S&P 500 Financials Index fell for the 12th straight day Tuesday, the longest losing streak on record. Coming into the year, many cited the tax overhaul and a rising rate environment as reasons for banks to rally. Instead, they’ve endured pressure from a flattening yield curve. The losses also come ahead of the final phase of the Federal Reserve’s annual stress tests and waning consumer confidence.
“They’re facing a rising rate environment, which historically has been fairly positive for banks,” Mona Mahajan, U.S. investment strategist at Allianz Global Investors, said on Bloomberg Television. “What we’re seeing here is the shrinking yield curve is actually not a good sign for the banks. Obviously, they like to borrow short, lend long, and if that yield curve is shrinking, that margin goes down as well.”
The S&P 500 Financials Index fell 0.4 percent to $443.50 as of 12:58 p.m. in New York Tuesday. Citigroup Inc. fell 0.3 percent, while Wells Fargo & Co. dropped 0.8 percent. JPMorgan Chase & Co slumped for the sixth straight day to extend its losses below its 200-day moving average.
Investors are taking note too, yanking cash from the largest exchange-traded fund tracking U.S. financials. The Financial Select Sector SPDR Fund, ticker XLF, has seen eight straight days of outflows, the longest streak in two years. Together, that’s amounted to nearly $1.8 billion in withdrawals from the fund, about 6 percent of its total market cap.
https://www.bloomberg.com/news/articles/2018-06-26/banks-endure-record-streak-of-losses-as-yield-curve-flattens
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As of yesterday, the 2-year to 10-year gap was at .34%. As recently as four years ago, the gap was close to 3%.
The last time the gap was this flat was 2006. Look at what happened:
ETA: BTW, there was a slight inversion in 2006. You can't see it in the chart above, but you can below. The inversion can be dramatic, as was the case in 1982, but each inversion has, since 1955, led to a recession:
