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Good morning, investors. The KBW Nasdaq Bank Index has fallen 14% from its August peak.
That might not sound like a big deal, but similar drops happened around the crashes of 2000, 2008, and 2022.
Is this an early warning? ↓
Bank Stocks Are Falling
Major U.S. banks are now in correction territory.
Here's how far they've fallen from their recent highs:
JPMorgan Chase: -11%
Bank of America: -19%
Citigroup: -15%
Wells Fargo: -18.5%
Goldman Sachs: -24%
Morgan Stanley: -19%
U.S. Bancorp: -15%
Capital One: -25%
PNC Financial: -16%
BNY Mellon: -14%
Even the KBW Nasdaq Bank Index, which tracks 24 major U.S. bank stocks, is down 14% from its August high.
But here's what worries me.
Before the 2000, 2008 and 2022 market crashes, bank stocks peaked 2–11 months before the S&P 500.
And we may be seeing something similar today.
I went back to look at what happened in the last three major market downturns.
The pattern was pretty interesting:
2000 Dot Com Crash: The KBW Bank Index peaked in April 1999. The S&P 500 didn't peak until 11 months later.
2008 Global Financial Crisis: Banks topped out in May 2007, 5 months before the S&P 500.
2022 Market Crash: Banks peaked in October 2021, 2 months before the S&P500.
So why do banks tend to roll over first?
Think about how banks make money.
They need a healthy economy, steady lending demand and borrowers who can repay their loans.
When investors start pricing in weaker credit quality, rising loan losses or tighter lending conditions, bank stocks can come under pressure long before the rest of the market feels it.
In other words, banks can act as an early barometer of economic stress.
Now, I'm not saying a crash is around the corner. Three historical examples aren't enough to prove that.
But there's one thing I'd be watching closely:
If the S&P 500 keeps making new highs while bank stocks keep making lower lows, that's a dangerous divergence.
Michael Proffe has spent 30+ years beating the market and identifying powerful market trends.
He turned €30,000 into €29 million with his trend-following strategy.
Now, he’s zeroed in on 3 stocks he believes could be major beneficiaries of AI’s next phase — and they’re probably not the names you’d expect.
Support my research by checking out today’s sponsor. ↑
Portfolio Update
Since June 1, 89% of stocks have dropped more than 10%. Yet the S&P 500 keeps making new highs.
How? A handful of big names are doing the heavy lifting, with much of the excitement tied to AI. So what happens if that hype fades? I’ll let that thought simmer for a bit.
No changes to my portfolio last week.
Elsewhere
🚀 Elon Musk makes a wild prediction about what SpaceX could be worth. SPCX has gained just 1% since its IPO, so slow down... (Yahoo Finance)
☕ Starbucks has worked with advisers on a potential takeover of Chipotle, worth nearly $39 billion. Not sure if the pros outweigh the cons. (CNBC)
💸 Broadcom, Oracle, and SpaceX pursue blockbuster debt deals amid the AI buildout. As long as these investments pay off, it’s okay. If not... (Yahoo Finance)
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