A highly-respected banking stock guru warns that financial storm clouds loom for Wall Street’s bull rally.
The Vertical Group's Richard Bove “warns that the overall market is just as dangerous as the late 1990s, and he cites momentum — not fundamentals — as what's driving bank stocks to all-time highs,” CNBC.com explains.
"If we don't get some event in the economy or in politics or in somewhere that is going to create more loan volume and better margins for the banks, then yes, they would come crashing down," Bove told CNBC.
"I think that the risk in these stocks is very high at the present time," he said.
"If you go through the different products that the banks sell, just about every one of them are flat to lower in growth than they've been for at least a couple of years," he said.
Despite his qualms, Bove is “keeping his buy ratings on several of the largest banks — JPMorgan Chase, Bank of America, Citigroup, PNC Financial and First Republic. He advises investors to Wells Fargo and hold Goldman Sachs,” CNBC reported.
Bove also cautions that there's no indication when a deep sell-off could happen.
"I think you just have to go with the flow at the moment," Bove said. "The outlook again from the fundamental standpoint is not exciting, not positive, but the market doesn't care."
To be sure, the three major Wall Street indexes scaled new records on Tuesday, helped by gains in energy stocks and in Wal-Mart on the back of the company’s $20 billion share buyback plan, Reuters reported.
For September, the Dow gained 2.1 percent, the S&P rose 1.9 percent and the Nasdaq advanced 1.05 percent.
The strong gains extend the Dow's streak of winning quarters to eight. It's the longest since an 11-quarter boom that ended in September 1997, according to FactSet stats. Back then, the U.S. economy was going gangbusters under President Bill Clinton at the start of the dotcom boom.
The current streak began during the final three months of 2015 and accelerated after last fall's election. For those scoring at home, that's five winning quarters on President Barack Obama's watch and three under President Trump, who took office in January.
(Newsmax wires services contributed to this report).
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