A bet on banks is a bet on the U.S. economy. The reasons are pretty simple, banks are levered to the economy through their exposure to big and small businesses, real estate and the consumer.
Improvements in any of these areas can easily translate into better results for banks various businesses including commercial and industrial loans, small business loans, credit cards and mortgages. Still, with this group outperforming over the last three months, are investors late to the trade?
Not yet, if you know where to look, according to analysts and money managers. This is key for investors who have stood by and watched the KBW Bank Index rack up a 26 percent gain over the last three months, more than double the 12 percent return delivered by the S&P 500 index.
While bank stocks are now reflecting the healthier balance sheets of the nation’s banks, Jefferson Harralson, a managing director at Keefe, Bruyette and Woods wrote in an email to CNBC, the run in bank stocks reflect investors betting on a turnaround in the U.S. real estate market.
“In other words,” he wrote, “Some turnaround in real estate is already priced in.”
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