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Roula Khalaf, editor of the FT, selects her favorite stories in this weekly newsletter.
Forget the great seven. The septet of the big US technology groups has developed the call to be the only game in the city for investors. But some much less fashionable stocks did even better. It is time to take a closer look at the great 47.
The Stoxx 600 banking index, the 47 of the largest listed banks in Europe, has returned a little more than 200 percent since the beginning of 2022, according to Bloomberg, since the beginning of 2022. The so -called great seven achieved around 190 percent in the same period.
The striking statistics are partly reminded of how important it is to select the correct time series. The MAG 7 increases to 2,700 percent. Nevertheless, it is emphasized that the shares sometimes leave their heads behind.
Should the rally continue? If stocks had a blowy run, it is easy to move into the negative. After all, nobody likes to buy at the top of a cycle, and the surroundings are definitely more difficult. In 2022, the banks rose the interest rates for the same reason why the Tech shares had fallen this year. However, prices are falling again, which affects profitability.
However, they do not return to zero. Analysts expect the return of common equity to drop from 12 percent in 2024 to 11.4 percent in 2025 and 11.1 percent in 2026.
With regard to ratings, it is also easy to believe that banks look toppy. The index acts with almost the book value, well above the 10-year average of 0.7 times.
But then, as the Mag -7 diagram shows, selecting the right start date makes a big difference. Europe’s banks have been dysfunctional for more than a decade; With a longer-term horizon, the average price for booking is 1.1 times closer.
Or compare with the rest of the world: the KBW US banking index is currently being traded in almost 50 percent of the booking, while the global MSCI ACWI banks is 1.2 times. The comparison of the price-performance-based banks shows similar trends.
Another important measure is How much money The companies can return. Column dividends and return purchases and currently offers a total payment return of almost 10 percent, well above their historical average. This also supports the reviews.
The scope of the bank shares in recent years has been supported by a very weak starting point. In view of the changing interest rate environment and uncertainty about everything, from trade wars to local elections, it would be surprising if they could maintain the blister pace of recent years. However, there is still circumference before the ratings become too great.
