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KBW US Bank Index about to play catch-up

Updated: Aug 17, 2020

The big US banks start reporting next week, with JPM & Wells Fargo kicking off with their Q2 earnings on Tuesday the 14th. For the S&P to make new highs, the macro sensitive banks need to join the party. The Invesco US Bank Index ETF (KBW) is top heavy with the US majors; Goldmans, Bank of America, JPM, Wells Fargo, USB, and PNC - most of these banks are still down 30~50% year to date vs the S&P down only 3%. At 0.78x NTM PB this index looks a bit too cheap relative to the market and history (1x PB on average), especially given the excess capital and the new forward expectations provisioning the banks have applied. An RSI bounce to 60 (from the current 43) equates to around a 20% index rally to a level of 45. This would also take the KBW Index NTM PB to its 0.90~0.95 resistance level. Chart 1: KBW RSI, 50 & 200 MDA (Factset)


Chart 2: NTM PB KBW Index (Factset)



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