Monday, 09 October 2017 09:56

Why Financial Stocks are Set for a Fall

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(New York)

Financial stocks had a great run to start the year, then faded in the second and third quarters. Over the last couple of weeks they have again begun punching above their weight on renewed hopes for lower taxes and increased government stimulus. The big issue facing stock prices in financials is that a December rate hike looks very baked into current prices, meaning it may be time to get out of positions. That means there is little upside to be had, and given the Fed’s worries over the economy (and the poor jobs numbers last month), a lot of downside risk.

FINSUM: Basically, financials stock have an asymmetric risk profile skewed to the downside right now. We think there is a good chance the Fed will come up dovish in December, making financials look very risky.

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