“The good news? UBS said excluding the financial crisis of 2008 to 2009, bank stocks have dropped by about 25% to 30% peak to trough, on average, over the last several downturns and market shocks. That suggests the current selloff may have already priced in an economic recession, meaning bank stocks are “at or near the bottom,” UBS analysts wrote in a note to clients,” reports Tomi Kilgore for MarketWatch.
Markets may be trying to discern shapes in the shadows where there are none, overreacting to the recent spate of economic weakness. For instance, banking analyst Mike Mayo argues that Wall Street banks are trading at “recession prices but no recession.” On a price-to-tangible book value, banks have dipped to levels below pre-financial crisis, and some bank stocks are now trading below book value.
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