Bank stocks have been on fire as one of the strongest performing
sectors not only under the "Trump rally" but over the past year. For example, shares of JPMorgan Chase & Co. (NYSE:
JPM) is up more than 50 percent over the past year, while
shares of Goldman Sachs Group Inc (NYSE: GS) are higher
by more than 70 percent.
But the party may have come to an end, thanks to Wall Street analysts.
According to a Bloomberg
report, JPMorgan and Citigroup Inc (NYSE: C) have seen
their stocks slapped with more downgrades than upgrades by a margin of nearly two to one since the 2016 presidential election. This
also marks a deterioration from the prior three months when the downgrade to upgrade ratio was 1.5.
Related Link: Here's How
Financials Performed In Q4
Part of analysts' pessimistic view has to do with not only elevated valuations but the fact that many banks' implied cost of
equity or expected long-term return stands below 10 percent. Citigroup's banking analyst Keith Horowitz commented in a research note last week that this is a level that
is typically associated with negative share returns over the next six months.
Not all of Wall Street is bearish, and there is certainly another side of the story. For example, CLSA's
bank analyst Mike Mayo thinks bank stocks could gain another 50 percent over the next three years.
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