Banks have serially underperformed major indexes in most of the developed world since the 2007. Whether you blame record low interest rates, balance sheets that never fully recovered from the financial crisis, or a societal change in banking preferences in an increasingly technological world, one thing is certain: financial stocks have been a pretty poor investment for a long time.

In Europe, banks held their own during the 90s and early 00s, even posting healthy gains against the STOXX 600 from 2000-2006. But the last 15 years have been less prosperous.

The group has managed a trio of multi-year, counter-trend rallies (’08-’09, ’12-’14, and ’16-’17), but all failed to recover previous highs, and each failure has resulted in new lows.

Banks in Japan have lagged for even longer. They meaningfully declined relative to the Nikkei 500 throughout the late 90s. After an impressive, five-year bounce at the turn of the century, the downward trend resumed. New lows have been the theme since 2015.

Back home in the U.S.A., though, things were different. Sure, financial stocks suffered a devastating blow during the Great Recession. But in the aftermath, capital control were tightened and balance sheets strengthened. On a relative basis, bank stocks didn’t get any worse – quite the feat given the magnitude of U.S. equity outperformance vs. international counterparts over the last decade.

Until now.

In the midst of a coronavirus-fueled recession, banks have broken their 2009 lows.

Unwavering strength from other market sectors (e.g. Information Technology) certainly helped to push Financials to new relative lows, but bank weakness is bigger than U.S. Tech – it’s clearly a global phenomenon.

Perhaps this most recent violent selloff is the final shakeout before a resurgence, one that restores the financial sector to its former glory. Or maybe this is the continuation of an unstoppable trend.

What if U.S banks have just been digesting the 2007-2009 collapse for the last decade? What if they just started their next leg lower?

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