The stock market is stuck in neutral, with several sectors failing to keep up. Call it a lack of leadership.
One key sector that has really been struggling is banking. And let’s just say that the economy needs healthy banks and a healthy financial sector.
Today’s chart tells us that we may not be ready to turn around just yet. Below is a chart of the KBW Bank Index (BKX) compared to high yield spreads (lower pane).
As you can see, bank stocks tend to find a quality low when high yield spreads blow out. Right now, spreads are only at 4.74. Let’s just say that the spread is far from prior levels when the bank index formed a quality low.
Could banks turn higher from here? Sure. But something tells me that it’s okay to be cautious on banks right now. Stay tuned!
$BKX KBW Bank Index versus High Yield Spreads Chart
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