If the S&P 500 does break to new highs in the coming weeks, it will undoubtedly come without the support of financials.
This puts a popular market maxim to the test. Some say that the market needs banks to participate for a sustainable rally to develop. The basic line of thinking is a healthy economy has a healthy banking system etc
Well, 2016 is an extreme environment and banks have lagged and dragged for years. It hasn’t mattered.
Banking is an industry facing secular headwinds. The major headwind (collapsing yields) coincidentally is helping keep market breadth strong. That nullifies any lack of participation by the banks as a market wide measure takes precedence over a specific sector.
This is not to say we wouldn’t prefer to see banks trading well. This isn’t saying a move to new highs would be long term healthy and sustainable. We’ve just got to play the hand we’ve been dealt and the cards suggest a break higher.
Trade ’em well!