Banking Sector Shares Are Down but Certainly Not Out

Bryan Perry

A former Wall Street financial advisor with three decades' experience, Bryan Perry focuses his efforts on high-yield income investing and quick-hitting options plays.

Banking sector shares are down but certainly not out, despite the highest inflation in 42 years and growing concerns about a potential recession.

Even though banking sector shares have been battered during the latest market downturn, they likely will rebound sooner or later. To be sure, banks are much better capitalized and regulated now than during last banking crisis in 2008.

Also called the Global Financial Crisis, the 2008 upheaval affected markets globally to trigger the most serious financial fallout since the Great Depression in 1929. I do not expect anything of the kind to occur this time.

Banking Sector Shares Are Down but Certainly Not Out, My Cash Machine Newsletter Reports

In fact, I found a unique way to profit and I proposed a trade to do so for subscribers of my Cash Machine investment newsletter. That newsletter focuses on high-yield opportunities that are ideal for times such as now when inflation is spiking, and investors are seeking heightened returns to keep up.

Investors are bailing out of certain sectors, including banking. However, I view some of the selling as excessive.

The banking sector is one area where fears of an impending disaster may be too bearish. Nonetheless, an inverted yield curve makes it next to impossible for banks to profit from borrowing short from the Federal Reserve and lending long to their A-list clients. Even well-managed American banks are in a challenging environment. The question is: for how long?

Banking Sector Shares Are Down but Certainly Not Out, Including Bank of America

One of the more straight-shooting chief executive officers (CEOs) in the banking industry is Brian Moynihan, who heads Bank of America (BAC). Moynihan has steered the recovery of America’s largest consumer-oriented bank for the past several years.

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Although the bank’s second-quarter results were mixed, positive revenue stood out as an organic tenet to the hard work being done by Moynihan and his team. The bank’s share price is showing signs of a recovery after cratering to just 30.13 on July 14, down 38.3% from its recent high of $48.86 on Feb. 8.

Chart courtesy of www.stockcharts.com

The bank upped its reserves for any loans that might prove risky if economic conditions persist into 2023. So far, Bank of America has set aside $523 million for potential loan losses.

Those additional reserves impacted the banking company’s net income, but I think the move is responsible. The big question for Bank of America is how long the softening of economic conditions will last in a market where inflation may or may not have peaked.

Banking Sector Shares Are Down but Certainly Not Out, Aided by a Strong Labor Market

Keep in mind that the labor market is strong, and consumers are increasingly cautious. In addition, the Fed has committed publicly to bringing down inflation.

Market sentiment is about as bearish as I have seen in many years. However, the stock has pulled back to a level that I believe will hold because the bank is now trading at 1x book value, a serious discount to its future trajectory.

So, what to do with this conundrum? I recommended that my Cash Machine investment newsletter subscribers make a trade to benefit from this situation. But the trade is not a standard one that simply involves the purchase of Bank of America shares at a low price and the sale later at a higher price.

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Banking Sector Shares Are Down but Certainly Not Out, as My Recommendation Reveals

The trade I proposed offers a compelling way to harness a 6% current yield and get paid handsomely to wait out what will be a sudden train leaving the station when this market recovers. This is the same type of security that was issued to Warren Buffett‘s Berkshire Hathaway (BRK.A; BRK.B) when he and his company were asked to step in and provide stop-gap financing for certain banks in 2008.

I have endured financial crises in the past and learned how to steer through them. Would you rather rely on a seasoned stock market professional like me or someone who may be seeing and managing these kinds of risks for the first time in their careers? I am experienced in common stock, preferred stock and option trading, allowing me to recommend the best ways to profit at a given time.

As the trade I announced to my Cash Machine investment newsletter subscribers indicates, banking sector shares are down but certainly not out. For anyone who is interested in learning about this trade and receiving my latest ideas about high-yield investing, I urge you to click here to seize the opportunities ahead to combat the highest inflation in 42 years and risk of a potential recession.

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