Financial stocks have historically been solid bets in rising-rate environments. Increases in the yields of the 10 and 30-year Treasuries over the past week have tripped the alarm for many investors, who see this and inflation indicators as good reasons to bet on a recession. Tech (XLK, VGT, QQQ) and other sectors are tanking along with the major indices (DIA, SPY) while international tensions mount, leaving investors wondering where they can turn.
Many investors are being encouraged to buy the dip, regardless of the sector. While this strategy may work in the long term, it may be more prudent to find strategies that have worked in historically similar markets. Stocks such as J.P. Morgan (JPM), Goldman Sachs (GS), and Visa (V) are examples of companies which have performed well during months of rising-rates in the past.
Currently regional banks are surging, with the SPDR S&P Regional Banking ETF (KRE) serving as a catch-all, and individual banks such as SVB Financial Group (SIVB) attracting investors in recent days. Bank of America (BAC) has also done well, although a high level of implied volatility in the options market surrounding the stock has some wondering what direction it will take.
Banks are likely, based on historical trends, to be more profitable during rising rate environments due to their ability to create favorable margins in the interest rates they offer banking customers on loans and savings accounts. Insurance companies (PRU, ALL, BRK.A) also do well with rising rates, historically speaking, since they sit on substantial cash reserves that must earn returns from predominantly low-risk instruments. However, this is not necessarily the whole picture, and things do change.
Analyst Dick Bove points out that the profiles, exposures, and competition of banks have been changing over time, and the old paradigm may be shifting. Citigroup (C) is one bank that he singles out to serve as an example. With the majority of its loan revenue coming from overseas, it has a relatively high exposure to the cost of money that will not be fully offset by the rates they can earn on loan interest. Bove feels more secure with tech-based financial institutions such as Comerica, Silicon Valley Bank, and PacWest Bancorp.
The RSI Indicator for JPM moved out of oversold territory on April 19, 2024. This could be a sign that the stock is shifting from a downward trend to an upward trend. Traders may want to buy the stock or call options. The A.I.dvisor looked at 31 similar instances when the indicator left oversold territory. In of the 31 cases the stock moved higher. This puts the odds of a move higher at .
The Momentum Indicator moved above the 0 level on April 26, 2024. You may want to consider a long position or call options on JPM as a result. In of 85 past instances where the momentum indicator moved above 0, the stock continued to climb. The odds of a continued upward trend are .
The Moving Average Convergence Divergence (MACD) for JPM just turned positive on April 25, 2024. Looking at past instances where JPM's MACD turned positive, the stock continued to rise in of 49 cases over the following month. The odds of a continued upward trend are .
The 10-day moving average for JPM crossed bullishly above the 50-day moving average on May 01, 2024. This indicates that the trend has shifted higher and could be considered a buy signal. In of 15 past instances when the 10-day crossed above the 50-day, the stock continued to move higher over the following month. The odds of a continued upward trend are .
Following a 3-day Advance, the price is estimated to grow further. Considering data from situations where JPM advanced for three days, in of 333 cases, the price rose further within the following month. The odds of a continued upward trend are .
JPM may jump back above the lower band and head toward the middle band. Traders may consider buying the stock or exploring call options.
The Aroon Indicator entered an Uptrend today. In of 286 cases where JPM Aroon's Indicator entered an Uptrend, the price rose further within the following month. The odds of a continued Uptrend are .
The Stochastic Oscillator may be shifting from an upward trend to a downward trend. In of 61 cases where JPM's Stochastic Oscillator exited the overbought zone, the price fell further within the following month. The odds of a continued downward trend are .
JPM moved below its 50-day moving average on May 03, 2024 date and that indicates a change from an upward trend to a downward trend.
Following a 3-day decline, the stock is projected to fall further. Considering past instances where JPM declined for three days, the price rose further in of 62 cases within the following month. The odds of a continued downward trend are .
The Tickeron SMR rating for this company is (best 1 - 100 worst), indicating very strong sales and a profitable business model. SMR (Sales, Margin, Return on Equity) rating is based on comparative analysis of weighted Sales, Income Margin and Return on Equity values compared against S&P 500 index constituents. The weighted SMR value is a proprietary formula developed by Tickeron and represents an overall profitability measure for a stock.
The Tickeron Profit vs. Risk Rating rating for this company is (best 1 - 100 worst), indicating low risk on high returns. The average Profit vs. Risk Rating rating for the industry is 60, placing this stock better than average.
The Tickeron PE Growth Rating for this company is (best 1 - 100 worst), pointing to consistent earnings growth. The PE Growth rating is based on a comparative analysis of stock PE ratio increase over the last 12 months compared against S&P 500 index constituents.
The Tickeron Price Growth Rating for this company is (best 1 - 100 worst), indicating steady price growth. JPM’s price grows at a higher rate over the last 12 months as compared to S&P 500 index constituents.
The Tickeron Seasonality Score of (best 1 - 100 worst) indicates that the company is fair valued in the industry. The Tickeron Seasonality score describes the variance of predictable price changes around the same period every calendar year. These changes can be tied to a specific month, quarter, holiday or vacation period, as well as a meteorological or growing season.
The Tickeron Valuation Rating of (best 1 - 100 worst) indicates that the company is significantly overvalued in the industry. This rating compares market capitalization estimated by our proprietary formula with the current market capitalization. This rating is based on the following metrics, as compared to industry averages: JPM's P/B Ratio (1.907) is slightly higher than the industry average of (0.945). P/E Ratio (12.258) is within average values for comparable stocks, (8.857). Projected Growth (PEG Ratio) (3.448) is also within normal values, averaging (2.584). Dividend Yield (0.021) settles around the average of (0.100) among similar stocks. P/S Ratio (3.779) is also within normal values, averaging (2.430).
The average fundamental analysis ratings, where 1 is best and 100 is worst, are as follows
a major bank
Industry MajorBanks