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It is not surprising that banks are still struggling following the GFC – Global Financial Crisis. After all it was a finance crisis and whilst the memory for some may have faded the reality for many still lives on. And in fact for some it will never fade. For some it meant family fortunes wiped out and for many retirees on slim pickings it probably means a couple of frugal decades. And for some still working but with meager superannuation it will mean working on for many more years and/or a radical change in lifestyle.
Why? Well, it will be some time before investments in banks – and that is a sizeable portion of many investment/superannuation accounts – get back to their previous giddy heights.
Let me explain further.
We will start by looking at the US Bank Index:
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Our local Finance sector:
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NAB
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And CBA:
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All the above are weekly line charts with a 90-week Elliott. You can see from both the US and our local Index chart that banks are a long way from recovery with the US index regaining only about 25% from low to high and our local index recovering about a third.
When we look at individual banks some mirror the USA and our local index – like NAB – whilst some say CBA has done very well – all things considered.
Now whilst Elliott indicates that CBA may get back to its prior giddy heights in the coming months, I would treat this with some caution.
I would be more inclined to at least wait for the moment and accept the indices more as a guide. That is, we are likely to see more range trading – but with the chance in the coming months of a reversal in the downward bias.
Apology:
The following is an extract from an email from reader Rob K “…say how disappointed I was seeing you paint our profession as the enemy based on the actions of someone 15 years ago on the other side of the world. Granted there are dishonest brokers out there, however the reality is that the vast majority of us have our clients’ best interests at heart.
But I have to confess it has been compelling reading – not so much because it reads like a bestselling piece of fiction but rather because it confirmed much of my suspicions of brokers when I first started investing in shares with some keen interest – some 20 years ago...”
I have emailed an apology to Rob (and he has graciously accepted) as I can understand how my words could be seen as suggesting all brokers acted in a similarly dishonest manner – which I of course believe not to be the case. So thanks, Rob for pointing this out!
Enjoy the ride
Tom Scollon
Chief Analyst |