# bank stocks down?



## jargey3000 (Jan 25, 2011)

wha's goin on with banks stocks being down lately?
(other than the fact that I just recently bought into td & bns....sheesh,)


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## Spudd (Oct 11, 2011)

The whole market is down... look at a graph of your banks vs the total market and you'll see. I don't think it's anything particularly to do with the banks.


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## twa2w (Mar 5, 2016)

1) Rising interest rates. This makes dividends less attractive compared to fixed income.

It also means costs for many companies go up. Although this isn't a factor for banks, it will weigh very heavily on debt heavy dividend payors like pipelines as their interests costs go up.

2) the threat of inflation from a full employment economy

3) contagion. Even the inflation resistant stocks etc get caught up in the market sell off. Often as pro traders juggle portfolios.

Spudd is right - not really specific to banks but banks will face headwinds over the next few years rather than the tailwinds of the last 30.


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## new dog (Jun 21, 2016)

If rates keep up and re drops this will be bad for the banks.


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## lonewolf :) (Sep 13, 2016)

Bank stocks usually perhaps even always head lower before the rest of the market before historic declines. This is a major warning.

The state pension funds are going belly up with low interest rates they need interest rates a lot higher 8%


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## birdman (Feb 12, 2013)

new dog said:


> If rates keep up and re drops this will be bad for the banks.


Not so sure of your reasoning here, however, if you are referring to the banks paying higher rates for GIC's and then the rates going down and their getting stuck with these rates I do not agree with your comments. F/I's match the maturities of their assets and liabilities and their profit on these is based on the spread between the two. When I was in the business we managed it weekly and ensured the various maturities matched each other and when they didn't artificial hedges were put into place. Its a very complicated but important process 
and way more than I have the skills nor time to explain here due to the large number of variables that come into play. Suggest you read some of the comments in the F/I's annual reports which deal quite extensively with the matter. Of course, rising rates are generally good for F/I's as they are slow to raise their deposit rates in the "demand deposit" area (chequing and some savings accts) yet the "demand loan" rates go up right away. Just a few off the wall comments are that I believe the duration of a 5 yr mtge is actually only around 42 mos and not all 5 yr GIC's are matched to residential mortgages but to commercial mortgages or fixed rate commercial term loans at higher rates. Extremely complicated but in my opinion is not a major risk.


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## Spudd (Oct 11, 2011)

frase said:


> Not so sure of your reasoning here, however, if you are referring to the banks paying higher rates for GIC's and then the rates going down and their getting stuck with these rates I do not agree with your comments.


Just FYI, I believe he meant if real estate drops, not that the rates re-drop.


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## humble_pie (Jun 7, 2009)

frase said:


> ... rising rates are generally good for F/I's as they are slow to raise their deposit rates in the "demand deposit" area (chequing and some savings accts) yet the "demand loan" rates go up right away.



^^ what i've always read

there are studies showing that, historically, bank stocks have tended to rise into the early stages of sustained interest-rate advances

we are well into the early stage of rate hikes now & bank stocks have been doing fabulous. Current downturns are due to trumppatitus, a highly contagious virus transmitted by word of mouth. The first disease in recorded history that anyone can catch off the internet


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## new dog (Jun 21, 2016)

Spudd said:


> Just FYI, I believe he meant if real estate drops, not that the rates re-drop.


Thanks spudd that is what I meant.


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## AltaRed (Jun 8, 2009)

humble_pie said:


> we are well into the early stage of rate hikes now & bank stocks have been doing fabulous. Current downturns are due to trumppatitus, a highly contagious virus transmitted by word of mouth. The first disease in recorded history that anyone can catch off the internet


^ +1 Even Dukoral cannot save us from this infection. Still think the banks will do just fine. I expect to still own my 4 bank stocks when I become comatose.


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## ian (Jun 18, 2016)

Latest reports for some of the large pension advice firms is that DB funding in Canada is very good. There are some issues with a few but overall they are in very good shape from a funding-on going and wind up, perspective. CPP is on cloud nine...they are doing extremely well thank you very much.

https://www.benefitscanada.com/inve...highest-solvency-in-nearly-two-decades-119629

US..not so much. Huge SS challenge.


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