I know no one has a crystal ball for the future, but will bank stocks just keep going up and and up? I’m looking at getting into some but buying at ATH kind of seems wild.
And I know you shouldn’t time the market, but what are the risks?
Posted by CMB3672
10 Comments
Example tickers?
They’re among the safest in the world due to regulations in Canada. Here’s a comparison to the S&P 500 over the last 5 years.
SPY: ~86%
CIBC: 131%
RBC: 122%
BMO: 84%
TD: 78%
Scotia: 46%
They don’t look too out of line anywhere to me. Some underperformed the S&P500, some overperformed, they are more or less inline with what I’d expect
Totally fair concern. Bank stocks don’t just go up forever, they’re very cycle-driven. At highs, the risks are usually rates staying higher for longer (pressuring loan growth), credit quality rolling over, and margins compressing if cuts come faster than expected. If you want in, easing in or buying on pullbacks tends to make more sense than going all-in at ATH.
Timing is Most Important !!
JPM is the best banking stock
Canadian banks are generally very solid, but that does not mean they are risk free or that they only go up. A big reason they feel safe is the oligopoly structure and tight regulation, which limits blowups but also caps growth. You are mostly buying steady earnings and dividends, not explosive upside.
The main risks right now are macro driven. A prolonged housing downturn would hurt loan growth and credit quality, especially given how levered Canadian consumers are. Higher for longer rates can pressure borrowers even if they help net interest margins in the short term. There is also regulatory risk since capital requirements can change and directly affect returns.
Buying at all time highs is uncomfortable, but for banks timing usually matters less if your goal is income and long term compounding. Many people handle that by dollar cost averaging and focusing on total return including dividends. If you expect fast capital appreciation, banks may disappoint. If you want stability and yield with moderate growth, they still make sense as part of a diversified portfolio.
Just buy bank.to and be done with it, good dividend, paid every month and your pretty well invested into all the big banks.
They are good stocks overall but there are some issues. Potentially with BMO US mod market and real estate exposure. TD id banned from growing their US business die to the money laundering issue. The US is obviously the big growth opportunity for all of them.
They will until they don’t
At some point there will be a reversion to the mean. Increased mortgage rates have not hit all consumers yet