Bank of America regularly conducts a survey of a number of mutual fund managers. The survey conducted last week revealed that 80% are clear that North American technology stocks are the “preferred and saturated” of the investment ecosystemIn contrast, it emerged that the most devalued stocks are those of the banking sector.
You can see below a graph of the relative evolution of technological stocks against stocks in the banking sector:
The 'KWB Bank Index' of the 24 largest North American financial stocks remains with drops of up to 32% in 2020, even as the North American stock market continues to make new all-time highs (thanks to the shares of technology companies), taking into account that only five of the companies represent 23% of the weighted market value of the S&P 500 index.
Leaving aside the fact that a rise in defaults on retail debt for banks, the low interest rates established by the Fed and the minimum necessary operating expenses are weighing down the profit margins of financial institutions.
A clear indicator tends to be the purchases and sales of the investment company Berkshire Hathaway of the famous investor Warren Buffett, who got rid of all the shares they held in this sector, except for the shares of 'Bank of America' … Even so, all this could be interpreted as a good time to buy bargains …
How does all this impact us and why should I care?
As we have seen, some already think that all the shares of financial entities are already very oversold, and although their financial statements are in better shape than they were in their day before the 2008 crisis, there is the fear about the possibility of two to three years in losses in 2021 and 2022, as happened at the time in 2009 and 2010.
Even so, large institutional investors are beginning to show some interest in repurchasing shares in financial institutions, especially because the banking system tends to represent a good bet on economic recovery.
It is also worth mentioning that, although interest is returning, they are the same. There is still some reluctance until interest rates rise in the US (something that investors believe will not happen until the coronavirus vaccine is found or until there is a significant growth in inflation).
The fact that the pros are beginning to think that tech stocks are overbought, it certainly seems that small investors may have more power than ever to move the markets …