As one of my mentors used to say, "stocks are smarter than analysts (fund managers, brokers, bankers etc.)"
The anti-Goldman frothers will have fun trying to discern the “conspiracy” behind this call. Goldman Sachs equities market strategist David Kostin said he was lightening up on financials in a note dated April 13 moving to “neutral” from “overweight,” on the sector, where he’s been since December 2010. Here’s why:Here are MarketBeat's Dow Jones compadres via NASDAQ:
Significant progress has occurred in some of the key drivers of our Financials upgrade that now leave risk/reward and our outlook neutral for the sector: (1) Credit trends have improved with credit reserve releases adding a cumulative 200 bp to the book value of large cap banks since 1Q 2010; (2) on March 18 the Federal Reserve approved capital plans for banks, allowing certain companies to return cash to shareholders via dividends and share buybacks; (3) loan demand growth is up 2% year/year (although total loans on bank balance sheets are down 3% in the first quarter); (4) ten-year US Treasury bond yields have increased by 62 bp to 3.59% from 2.97% while short-term rates remain unchanged; (5) US macroeconomic data has been better than consensus expectations; and (6) more information on potential bank capital rules has removed some uncertainty for investors....MORE
Goldman Sachs Cuts View Of Financial Stocks
Strategists at Goldman Sachs Group Inc.(GS) advised clients on Thursday to pare back exposure to financial stocks after four months beating the broader market.*Recently:
Goldman's chief stock strategist David Kostin reduced his view of financial stocks to "neutral" from "overweight" in a research note to clients.
Kostin justified noted that a handful of sector stock catalysts, such as Federal Reserve approval of dividend raises, are now expended.
Financial stocks on the Standard & Poor's 500 index fell 1% recently, as J.P. Morgan Chase & Co. (JPM), Citigroup Inc. (C) and Goldman Sachs led sector decliners. Financials stocks have fallen for five straight sessions.
In early December, Goldman analysts upgraded financial stocks to "outperform" for the first time since the financial crisis. The upgrade was premised on a strengthening U.S. economy and on the prospect for banks to raise dividends with the blessing of the Fed.
Financial stocks on the S&P 500 have risen 10% since the market close preceding Goldman's upgrade, versus an 8.5% rise in the benchmark.
Last month, the Fed approved dividend increases from banks including J.P. Morgan Chase, Wells Fargo & Co. (WFC) and State Street Corp. (STT). The Fed, however, did not approve a dividend boost from Bank of America Corp. (BAC).
"We upgraded the financials to overweight...on the belief that risk/reward was positive for the sector for the first time since the financial crisis," Kostin said in the report. Financial stocks are likely to perform generally in line with the market for the next three to six months, he said....MORE
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