Since bottoming out four years ago, the unmatched rebound in bank stocks since March of 2009 has been nothing short of astounding, with the KBW Bank Index (^BKX) more than tripling. Over the shorter-term too, banks have been market leaders on the road to record highs, and have also outperformed the S&P 500 (^GSPC) on a 1, 3, 6 and 12 month basis.
But according to Richard Suttmeier, chief market strategist ValuEngine, that leadership is not only about to end, it will carry broader ramificati0ons for the markets too.
"It is important that banks lead," Suttmeier says in the attached video. "The problem that I have with the big banks is that they're all rated hold. There's not a single buy among them. The last of the buys was Citigroup (C), but even that's not a buy anymore."
For the record, shares of Citigroup are up 77% over the past 12 months, making them the third best performer of some 80 stocks in the large cap financial sector (XLF), delivering roughly triple the return of the S&P 500 over the same period of time.
When asked if the market will be able to churn higher without the banks leading, Suttmeier is unambiguous.
"I don't think so. You cannot have a bull market if the financials roll over and trade lower," he says, noting that the previous peak cycle saw the banks topping in March of 2007, a full seven months aheadof the broader index peak in October.
To be fair, for all its leadership and triple-digit gains, the BKX has still only recovered about half the ground lost from its previous peak. And while other analysts have predicted that rising rates and an improving economy will extend the bank rally for years to come, Suttmeier's cautionary stance has seen him cut the entire group to neutral.
"They've had their run. Book your profits."