Editor's note: Even during a bull market, not every asset will go up. So, in today's Weekend Edition, we're taking a break from our usual fare to hear from Marc Chaikin, founder of our corporate affiliate Chaikin Analytics. In this piece – originally published in his free Chaikin PowerFeed e-letter – he looks at a part of the market that's still hurting... and explains why the turmoil is far from over.
Folks, we're seeing bull market signs all around us...
The market is full of opportunity right now.
But that doesn't mean every sector and subsector is doing well...
Ironically, one subsector designed to protect your money is actually destroying investors' wealth today. It's down around 24% year to date. And its bigger brother is down roughly 14% over the same span.
Those losses are huge compared with the broad market. The S&P 500 Index has gained more than 14% in 2023... And the tech-heavy Nasdaq Composite Index is up about 29%.
Avoiding a sector-specific wipeout is critical for investors...
Put simply, folks can find tremendous upside potential if they know where to look right now. But a misstep into the wrong sector or subsector could lead to serious losses.
Fortunately, avoiding those missteps is easy with the Chaikin Analytics Power Gauge. So today, let's take a closer look at the subsector that's currently destroying investors' wealth...
Folks, when it comes to six-month performance, one subsector is clearly the worst. And yet, it could already be fading from your memory...
You see, the "run on the banks" from just a few months ago has already moved out of the news cycle. But the financial sector as a whole is still hurting...
The Financial Select Sector SPDR Fund (XLF) is roughly flat this year. It has entirely missed the rally in the overall market. And that remains the case even as the Federal Reserve starts to loosen its grip on interest rates.
When we dig a level deeper into the subsectors, we come across a clear loser...
Regional banks.
In the Power Gauge, we measure that subsector using the SPDR S&P Regional Banking Fund (KRE). And it's easy to see on the chart that things are still seriously wrong. Take a look...
Regional banks have gotten wiped out this year.
But fortunately, as you can see in the bottom panel of the chart above, the Power Gauge noticed the change before it happened. It first flashed a "bearish" warning last December.
Today, the subsector still holds a "bearish" rating in the Power Gauge. And only 12 of the 138 rated stocks within this exchange-traded fund earn a "bullish" or better rating today...
Its bigger brother, the SPDR S&P Bank Fund (KBE), is nearly as bad. It holds just 11 "bullish" or better stocks. And 41 of its holdings are currently "bearish" or worse.
Folks, it's ironic...
Banks are supposed to protect our wealth. But they've destroyed a lot of investors' wealth so far this year. And as we've seen today, they're still acting as wealth destroyers.
Will things stay that way forever?
Absolutely not. The market will eventually rotate back toward financials.
But today, we're nowhere near that point...
Large banks are struggling. And the smaller players, the regional banks, are as "bearish" as it gets.
It might seem obvious. But I recommend you avoid this space until further notice.
Good investing,
Marc Chaikin
Editor's note: Several U.S. banks were downgraded this month. It's one of the big reasons why volatility is back. But one strategy can help you take advantage of the lingering turmoil. This technique has already locked in gains of 76%, 75%, and 113% since Chaikin Analytics launched it in March... And it's so crucial today, the Chaikin team is reopening their Charter Membership to help you start using it now. Get the details here, before this offer goes offline.
