Silicon
Valley Bank has quickly become the most popular finance company in the world.
Well, maybe it’s not how they wanted to get their moment of glory, but it
happened. And many banks have felt the effects of this event — stocks of the
industry indices have dropped harshly. So, is it a moment to buy cheapened bank
stocks? Or are you better off staying away from the industry?
Silicon
Valley Bank was the 16th largest bank in the US at the beginning of March and
now – it’s bankrupt. The clients have hastened to take their money on the
rumors on it not having the best financial conditions of SVL. Consequently,
Silicon Valley Bank, which served various startups, faced severe troubles like
the general decrease of venture capital for many clients, caused in part by
these problems on the contributor’s side
Several
days after Silicon Valley Bank, one more US bank,
Signature Bank, announced its bankruptcy . These events haven’t been anticipated
by many investors and traders – therefore they were afraid that such a fate
might await other banks and decided that it was time to withdraw money.
For
example, S&P 500 Financial index has dropped by -9% since the beginning of
March.
A
similar situation is taking form with European bank stocks — here is the chart
showing a fund based on Stoxx Europe 600 Banks index. But sometimes future
market movements may be forecasted by planned economic events. To monitor such
events you can use different trading tools — for example, the economic
calendar.
It looks
dramatic and, of course, there is a significant signal for the markets — the
crisis is here. It is likely that Silicon Valley Bank and Signature Bank will
not be its last victims. Moreover, analysts have even changed their forecasts
about the next planned Fed — now they are not so sure that the Federal Reserve will hike the key rate by
0.5%.
But it
is also likely that these problems can affect regional banks, not the major
ones. So, it might not be the worst moment to invest and rake in the profits
after buying cheapened stocks. We looked through the banks with the largest
capitalization that should ensure reliability. Here is a list of the
prospective stocks.
Bank of
America (BAC) — the
average forecast is +39% in the next 12 months.
Wells
Fargo (WFC) — the
average forecast is +37% in the next 12 months.
BNP
Paribas (BNP) — the
average forecast is +31% in the next 12 months.
Citigroup
(C) — the
average forecast is +27% in the next 12 months.
Goldman
Sachs (GS) — the
average forecast is +26% in the next 12 months.
JP
Morgan (JPM) — the
average forecast is +20% in the next 12 months.
All
these numbers look like ready-made solutions for successful trades. But every
company (and every case) is unique. That’s why you should never just rely on
the other’s opinion, and why analysis is a necessity for every trade you make.
Source: forexlive.com
