The health of our banking and financial sector is critically important to a strong economy. It’s also essential to the stock market.
Today, we look at a long-term ratio chart of the KBW Bank to S&P 500 Indices. We also compare this to the S&P 500 Index performance to identify patterns of importance.
Despite rising interest rates, banks continue to underperform. In this regard, the chart highlights three key bearish divergences. The last two happened to last two years in length and lead to big downturns. The current one is three years old.
Also, when considering that stocks have not performed well this year, it adds to worries that there could be much further to fall!
Now we must ask: Is the Bank/S&P 500 Index ratio sending another important bearish message, or will it be different this time?