Silicon Valley Bank has quickly become the most popular finance company in the world. Well, maybe it’s not how they wanted to get their moment of glory, but it happened. And many banks have felt the effects of this event — stocks of the industry indices have dropped harshly. So, is it a moment to buy cheapened bank stocks? Or are you better off staying away from the industry?
Silicon Valley Bank was the 16th largest bank in the US at the beginning of March and now – it’s bankrupt. The clients have hastened to take their money on the rumors on it not having the best financial conditions of SVL. Consequently, Silicon Valley Bank, which served various startups, faced severe troubles like the general decrease of venture capital for many clients, caused in part by these problems on the contributor’s side
Several days after Silicon Valley Bank, one more US bank, Signature Bank, announced its bankruptcy . These events haven’t been anticipated by many investors and traders – therefore they were afraid that such a fate might await other banks and decided that it was time to withdraw money.
For example, S&P 500 Financial index has dropped by -9% since the beginning of March.
A similar situation is taking form with European bank stocks — here is the chart showing a fund based on Stoxx Europe 600 Banks index. But sometimes future market movements may be forecasted by planned economic events. To monitor such events you can use different trading tools — for example, the economic calendar.
It looks dramatic and, of course, there is a significant signal for the markets — the crisis is here. It is likely that Silicon Valley Bank and Signature Bank will not be its last victims. Moreover, analysts have even changed their forecasts about the next planned Fed — now they are not so sure that the Federal Reserve will hike the key rate by 0.5%.
But it is also likely that these problems can affect regional banks, not the major ones. So, it might not be the worst moment to invest and rake in the profits after buying cheapened stocks. We looked through the banks with the largest capitalization that should ensure reliability. Here is a list of the prospective stocks.
Bank of America (BAC) — the average forecast is +39% in the next 12 months.
Wells Fargo (WFC) — the average forecast is +37% in the next 12 months.
BNP Paribas (BNP) — the average forecast is +31% in the next 12 months.
Citigroup (C) — the average forecast is +27% in the next 12 months.
Goldman Sachs (GS) — the average forecast is +26% in the next 12 months.
JP Morgan (JPM) — the average forecast is +20% in the next 12 months.
All these numbers look like ready-made solutions for successful trades. But every company (and every case) is unique. That’s why you should never just rely on the other’s opinion, and why analysis is a necessity for every trade you make.
