I received an email this week from a subscriber that said: “about 50% of my portfolio is in the major banks and my financial planner has advised me to sell all my bank shares. What do you think?”
To put it mildly, I think this is plain crazy. While I could understand if the advice was to reduce the exposure (the 50% holding is roughly double the 4 major banks combined market weighting of 22%), to go to a zero weighting in a sector that remains fundamentally cheap and is paying fantastic income is irrational.
Interestingly, the major banks have rallied strongly over the last fortnight. Rises of around 6% are the norm, with leader Commonwealth Bank closing on Friday at $75.45, up 7.4% on its close on 11 April. The rally comes ahead of bank reporting season (which kicks off on Wednesday with the ANZ) and as disruption pressures in the iron ore supply chain (that has benefitted our major resource companies) start to ease.