Word: marketeers
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Dates: during 2000-2009
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Financial stocks - banks, brokers, asset managers - led the stock market down earlier this year, and almost left the stage as many shares sank into single digits. In recent weeks, however, the group has reversed course, rallying strongly, and even led the market to a robust gain on Monday, with the Dow rising 235 points. So is this the sign of a true financial-stock recovery, or a seductive bear trap? TIME contributing editor John Curran caught up with Oppenheimer & Co. chief investment strategist Brian Belski, who was in Tel Aviv on Monday, to get his view on banks...
This year, financial-sector earnings probably troughed in the first quarter, so the risk becomes don't be too underweight. It takes a huge swing to go from not owning any financial stocks to being market weight in financial stocks. Big investors are scrambling to catch up. (Read "The Outlook for Stocks is Decidedly ... Mixed...
...much catching up still has to happen? Look at it this way: at the financial-stock peak they were around 27% or 28% of the S&P 500's total market capitalization; the financial sector got down to 9% at their low. Now they are about 12%. I believe the financial sector will rise back to 13% to 15%, which means the portfolio-readjustment buying isn't finished. But take note, the sector has had very big moves recently, and not all banks will be able to hang on for the next leg of this...
...financials may have a couple more months of relative strength as portfolios readjust, but when might banks and brokers reemerge as stock-market leaders? Before financials can emerge in a leadership position we will need to see some semblance of very stern regulation in the financial field, which will signal to investors that financial companies are clean - at that point they may even be overregulated. Also, between 2001 and 2007 financials added a bunch of capacity, and that needs to recede, through consolidation or simply going out of business. That's still a few years...
...Some market observers say they expect the rally will fizzle soon because the global economy remains in the deepest recession in decades. "It's difficult for India to live in splendid isolation while the rest of the world suffers serious economic damage," says Sanjoy Bhattacharya, a partner at Fortuna Capital, an offshore hedge fund. Tough challenges remain for India's economy, too, notes Sharma. "Just because there's been a good weekend doesn't mean you can forget all our problems of fiscal deficit and lack of infrastructure growth," he says...