The recent weakness in financial stocks does not necessarily point to the onset of recession but is likely part of a market trough, Joseph Zidle, portfolio strategist at Richard Bernstein, said Wednesday.
The S&P 500 financials sector closed in bear market territory on Tuesday, hammered by fears of a European banking crisis, concerns about profitability as interest rates remain low and exposure to ailing energy firms.
Bank stocks and the broader market bounced back in European trade on Wednesday on reports Deutsche Bank is considering buying back billions of dollars worth of its bonds. U.S. equity futures also pointed to a higher open.
Popular barometers indicate recessionary risks are rising, in part explaining the underperformance of financials, Zidle said. But he noted current labor market conditions and consumer trends do not historically lead to economic downturns.
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