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Bank Stocks
The financials will be the primary group in focus this week with earnings from the major banks coming on October 12 and 13. The Financial Sector ETF ($XLF) has risen by nearly 6.5 percent since September 1, beating the S&P 500 ($SPY) by nearly 3.5 percentage points. The recent rise in the banks seems tied to the outlook for one more Fed rate hike in 2017, and the paring of the Fed’s balance sheet.
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Banks stocks like JP Morgan ($JPM), Bank of America ($BAC), and Citigroup ($C), are the big names bank with their stocks all rising since the start of September. Citigroup has performed the best over the past month up by nearly 10 percent, while shares of Bank of America is up by almost 9 percent, and JP Morgan is up by about 5.5 percent. Even troubled Wells Fargo ($WFC) has caught a bid rising by 9 percent.
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 Bank Valuations
Using a valuation of price to tangible book value, Citigroup remains the cheapest in the group, trading at 1.12 times, while Wells and JPM continue to trade near two times. Citigroup has some multiple expansion since the start of September.
JPM Price to Tangible Book Value data by YCharts
Despite the recent rise in the stock prices, for the current quarter analyst have taken down their earnings estimates for shares of JP Morgan and Bank of America. Unlock Deeper Insights with Exclusive Member-Only Video Content on The Market Chronicles YouTube Channel – Just $34.99/Month
WFC EPS Estimates for Current Quarter data by YCharts
The Bond market has yet to see the same optimism as the financials stock year regarding the interest rate outlook, with the 10-year – 2 year Treasury spread yet to see material widening. Since banks generate a good portion of their earnings from the spread on interest rates, it should be interesting to see if how long they continue to diverge.
10-2 by Scorpio244 on TradingView.com
Other sectors worth watching
Continue to watch the Biotech’s and Technology sectors, the two groups have been the best performing groups of 2017, and the market is going nowhere without them participating. Also, the consumer discretionaries ($XLY) are very close to breaking out, and if the recent wage data from BLS labor report is a start of higher wages, then this sector could be a be beneficiaries.
XLY by Scorpio244 on TradingView.com
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Mott Capital Management, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.
Tags: JP Morgan, Bank of America, Citigroup, Wells Fargo, Banks, Biotech, Technology, Consumer Discretionary
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Charts used with the permission of Bloomberg Finance L.P. This report contains independent commentary to be used for informational and educational purposes only. Michael Kramer is a member and investment adviser representative with Mott Capital Management. Mr. Kramer is not affiliated with this company and does not serve on the board of any related company that issued this stock. All opinions and analyses presented by Michael Kramer in this analysis or market report are solely Michael Kramer’s views. Readers should not treat any opinion, viewpoint, or prediction expressed by Michael Kramer as a specific solicitation or recommendation to buy or sell a particular security or follow a particular strategy. Michael Kramer’s analyses are based upon information and independent research that he considers reliable, but neither Michael Kramer nor Mott Capital Management guarantees its completeness or accuracy, and it should not be relied upon as such. Michael Kramer is not under any obligation to update or correct any information presented in his analyses. Mr. Kramer’s statements, guidance, and opinions are subject to change without notice. Past performance is not indicative of future results. Neither Michael Kramer nor Mott Capital Management guarantees any specific outcome or profit. You should be aware of the real risk of loss in following any strategy or investment commentary presented in this analysis. Strategies or investments discussed may fluctuate in price or value. Investments or strategies mentioned in this analysis may not be suitable for you. This material does not consider your particular investment objectives, financial situation, or needs and is not intended as a recommendation appropriate for you. You must make an independent decision regarding investments or strategies in this analysis. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Before acting on information in this analysis, you should consider whether it is suitable for your circumstances and strongly consider seeking advice from your own financial or investment adviser to determine the suitability of any investment.
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