Of note: an interesting report from Cumberland Advisors. An ETF that tracks the KBW Banking Index is up a whopping 145% since March 9. It consists mainly of bigger, national banks. With their ‘bigness’ also comes ‘too big to fail-ness’ and political connections. Smaller, regional banks are a totally different story.
Politics in the Market
As obvious as the link between being deemed ‘too big to fail’ and ‘too small to matter’ is with subsequent stock pricing, the effect is much bigger than I expected. To boot, [[KRE]], a fund tracking mostly smaller banking stocks is up a respectable 49% since that same date in March. Did I say respectable? I meant market-lagging! The S&P 500 Index is up 59% in that same time.
Still, that other corner of the financial market, the insurers, also have put in a strong performance since March. The report highlights [[KIE]] as a proxy for insurance stocks. KIE consists of big insurers such as Aflac, Travelers, and MetLife. It’s up a whopping 153% since March 9. Certainly, insurance was boosted a bit by Travelers surprise inclusion in the Dow Jones Industrial Average, but the category is doing well in general. Outside of AIG, I can’t think of another insurer with ‘too big to fail’ status… unless you count the GSEs…
So What?
So what? Banks are on deck for earnings reports again. Today, JP Morgan Chase reported on their huge quarter, and a number of the big banks rallied with them. Here’s something for you to ponder: how much higher can the banks rally? Are we out of the woods for sure? Will “too big to fail” continue? Why have insurers been immune to the effects? Let me know what you think in the comments!
Disclaimer: I own Travelers stock, incidentally bought before they joined the DJIA.
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