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ValuEngine's Suttmeier: Bank Stocks 'Have Had Their Run'

By    |   Wednesday, 19 June 2013 08:15 AM

It's time to take profits in bank stocks, according to Richard Suttmeier, chief market strategist at ValuEngine, who also fears the broad market cannot continue higher without the participation of those stocks.

The widely followed KBW Bank Index has more than tripled since March 2009 when the stock market bottomed out and has also outperformed the Standard & Poor's 500 Index for the past year, Yahoo reported.

Now bank share prices have gone about as far north as they can go, Sutttmeier said.

Editor's Note:
Billionaires Dump Stocks. Prepare for the Unthinkable.

"It is important that banks lead," he told Yahoo. "The problem that I have with the big banks is that they're all rated hold. There's not a single buy among them. The last of the buys was Citigroup, but even that's not a buy anymore."

Suttmeier noted that at the last stock market top in 2007, bank stocks peaked in March before declining, and the broader market followed in October. "You cannot have a bull market if the financials roll over and trade lower," he said.

He said evidence of a top in banks' profit performance is the fact that their recent earnings growth can be attributed to reduced expenses, reduced loan loss provisions and non-interest income — not the bread-and-butter increases in profitable lending.

"They've had their run. Book your profits," Suttmeier advised.

A new Bank of America Merrill Lynch report found that bank stocks tend to decline when the Federal Reserve withdraws economic stimulus, The Street reported.

When the Fed ended earlier quantitative easing programs, bank stocks fell an average of 19 percent, compared with a 9 percent drop for the broader stock market during those times, the report said.

Paul Miller of FBR Capital Markets said earlier in June that bank stocks might have hit a ceiling.

"I think most of the good news is already factored into these stocks," he told CNBC. "Higher rates will help these banks out, but they have to go much higher."

But Barclays analyst Jason Goldberg was more optimistic about the share prices of big banks like Citigroup and JPMorgan.

"The group should benefit from the prospects of higher interest rates," he told CNBC. "As the economy expands, loan growth follows. Interest rates should rise, helping net interest margin, helping the capital markets — which aids fee income.

Editor's Note: Billionaires Dump Stocks. Prepare for the Unthinkable.

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It's time to take profits in bank stocks, according to Richard Suttmeier, chief market strategist at ValuEngine, who also fears the broad market cannot continue higher without the participation of those stocks.
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2013-15-19
Wednesday, 19 June 2013 08:15 AM
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