I have been a bull on the banks this year, but with almost three months gone, am a little out of step with the market (a polite way of saying I am wrong so far). After last Friday’s sell-off, that was fuelled by President Trump’s mad idea to re-ignite trade tensions, the Financials excluding A-REIT index has underperformed relative to the market – down by 4.5% compared to the market’s overall return of -2.9%.
No one likes negative returns, and if Trump raises the stakes again, or China responds aggressively, our sharemarket will follow the US market down. Our banks won’t be spared the pain, so questions about “buy or sell” will become somewhat academic.
Rather, I take the view that “common sense” will prevail in due course and that markets will calm down and resume their upward trend. Given the impact that the Royal Commission has had on banks over its first couple of weeks, and the relative weighting that banks have in many investors’ portfolio, the question about whether to buy and increase weighting, or sell and decrease weighting, remains pertinent.