Regular readers know that I’ve worked in finance for more than 50 years…
Because of that, I know some of you are on the verge of making a dangerous bet.
You see, when the market is experiencing a lot of turbulence, it’s tempting to act like a contrarian. And the news can’t get any worse for financial stocks these days, right?
Baron Rothschild comes to mind. He was a British nobleman and banker in the 18th century. And he’s famous for saying…
The time to buy is when there’s blood in the streets.
But there’s a catch…
A “blood in the streets” sector doesn’t always spell opportunity.
Now, I don’t pretend to know every twist and turn in the markets. But as I’ll show you today, the Power Gauge is telling us to wait until the dust settles in the financial sector…
As a whole, the financial sector is pretty bleak today. We can see that through the Financial Select Sector SPDR Fund (XLF), an exchange-traded fund (“ETF”) that tracks this space…
We’ve talked about the Power Bar ratio before. It’s part of our Power Gauge system. And it helps us compare the number of favorably and unfavorably ranked holdings at any time.
As you can see, only four stocks within XLF have a “bullish” or better rating today (marked in green below). And the Power Gauge is “bearish” overall on this ETF. Take a look…
The banking subsector is even worse…
We track this space using the SPDR S&P Bank Fund (KBE). It’s down roughly 20% so far this year. And not surprisingly, 30 of its holdings earn a “bearish” or worse rating today…
On top of that, the damage is now hitting regional banks…
This group is calling on the Federal Deposit Insurance Corporation (“FDIC”) for help. It hopes that the FDIC will insure all deposits – even those above its historical $250,000 limit.
Once again, the Power Gauge shows us why we want to stay far away from this subsector…
The SPDR S&P Regional Banking Fund (KRE) only has one “bullish” stock out of nearly 140 holdings with Power Gauge ratings. It also earns a “bearish” overall grade today.
KRE is down about 26% this year. That’s a staggering loss. And there’s no sign of relief yet.
Put simply… be very careful if your contrarian senses are tingling for financial stocks.
The market includes good opportunities today. But this space isn’t offering many of them.
Do I believe that banking and other financial stocks will eventually turn around?
Absolutely. And when they do, it could lead to great opportunities for investors.
But now is not the time to rush back in…
The proverbial knife is still falling. And investors who try to catch it will likely get cut.
We need to focus on sectors that are producing plenty of “bullish” opportunities…
Right now, the top subsector in the Power Gauge paints a very different picture. It currently includes 22 “bullish” or better stocks. And it has zero “bearish” or worse stocks.
Our 20-factor Power Gauge system is based on my five decades of Wall Street experience. It’s specifically designed to help us navigate tough market environments like this one.
Financial stocks are just too risky right now. Avoid them until the dust settles.
Good investing,
Marc Chaikin
P.S. It’s tempting to look for contrarian opportunities in today’s challenging market…
But you need to be careful.
The recent wave of bank collapses changes everything. And now, you need to know what comes next. That’s why I’m hosting a special online event next Tuesday, March 28…
In short, you need to do one thing this year to be on the right side of history. You can’t afford to miss what we’ll talk about. And it’s absolutely FREE to attend. Sign up right here.
