Cart (0)
business newsBroker-Dealers Anticipate Return to Stocks
Sure, financials have been performing well, but broker-dealers are doing even better. There's a powerful message in that.
PRINT
 |
|
-- Mick Jagger
I continue to stress the idea in my writings that market internals seem to be suggesting that we are entering a reflationary environment similar to 2003 and 2009, whereby risk assets strongly recover off of deflation scare levels on anticipation of a pickup in global economic growth.
I recently did a segment on Bloomberg Radio where I specifically addressed this idea, with a particular focus on what financials seem to be suggesting. I stated that anything with leverage that was a curse to have last year likely can be a strong performer in 2012. Momentum has been powerful in the sector so far, but is there a specific industry group that may have more potential than even badly beaten-down bank stocks?
Take a look below at the price ratio of the iShares Dow Jones U.S. Broker-Dealers Select Sector SPDR ETF (IAI) relative to the Financials Select Sector SPDR ETF (XLF). As a reminder, a rising price ratio means the numerator/IAI is outperforming (up more/down less) the denominator/XLF.
Click to enlarge
Broker-dealers within the financials industry have underperformed significantly following the ratio peak in early March 2009 as the broader sector outperformed those stocks more sensitive to trading, transactions, and brokerage. However, since the middle of January, the pace at which broker-dealers have been advancing upward is faster than financials' pace, although financials themselves have been on a tear.
Could recent strength in stocks such as Schwab (SCHW), and TD Ameritrade (AMTD) be signaling that investors are anticipating a return to stocks as assets and trading volume return to more normal levels? Given that Schwab is the largest custodian of customer assets in the world, wouldn't it make sesne that outperformance in Schwab might be an indicator of an expected pickup in assets under management growth? Wouldn't TD Ameritrade see a pickup in new account openings to trade stocks if investors get more comfortable with the idea that a true bull market may be at hand?
Within the context of the Winter Resolution and the earlier linked interview, this would be consistent with the idea that money may be forced to chase higher past prices, causing a self-reinforcing positive cycle for stocks.
Twitter: @pensionpartners
This writing is for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction, or as an offer to provide advisory or other services by Pension Partners, LLC in any jurisdiction in which such offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Pension Partners, LLC expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
