Why Banking Stocks Remain a Great Bet at Current Valuations

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S&P 500 News

KBW Bank

Market Overview Analysis by Adam Turquist covering: S&P 500, KBW Bank. Read Adam Turquist's latest article on Investing.com

The big banks officially kicked off the third-quarter earnings season last Friday. At a high level, results have been good enough to drive the broader banking space to year-to-date highs. The return of animal spirits in deal-making has been a major theme as investment banking revenue surged across most major banks.

His comments were echoed by several others in the C-suite, where recession talk was limited. As highlighted below, among the 17 companies within thethat have reported third-quarter results, the mentions of “recession” or “economic slowdown” during earnings calls have consistently dropped throughout the year. Furthermore, the mentions of “soft landing” or “economic growth” have started to improve this quarter.

Despite near-term overbought conditions, momentum and market breadth measures suggest this rally has more room to go. Every stock within the KBW Bank Index remains above its 200-day moving average , while nearly every member registered a recent 52-week high. Relative strength is also improving. As highlighted in the bottom panel of the chart below, the KBW Bank Index vs. S&P 500 ratio chart remains in an uptrend and above its 200-dma, pointing to continued bank outperformance ahead.

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