Regional banks live far-out on the financial sector risk curve.
These companies take deposits and invest in fixed-rate assets—leaving them open to interest rate risk, and more specifically, duration risk.
When the Fed aggressively raised rates a few years ago, the market value of bank assets plummeted. At the same time, customers were withdrawing funds to earn higher yields elsewhere.
Massive losses were realized, and some big regional banks didn't make it.
But that was over two years ago. Rates have stabilized, and the balance sheet issues have improved.
More importantly, Regional Banks have undergone a prolonged bottoming process, and a new primary uptrend is underway.
And just look at what money-center banks and international banks are doing. They've been some of the best stocks around the world.
Whether you look at Europe, Latin America, or Asia-Pacific, banking stocks sit near the top of every leaderboard.
Do you want to make the bet that Regional Banks won't follow their peers?
Do you think this unprecedented performance gap between big banks and little banks will persist?
