Key facts: The S&P 500 bank index is down 7.2% so far this month. Investors are nervous remembering the crisis that hit the sector last year. Growing concerns about a possible recession in the United States, supported by a series of negative economic indicators, resulted in a sharp fall in bank stocks on August 5, labeled «Black Monday», due to the collapse of the stock market around the world, including that of bitcoin (BTC) and other cryptocurrencies. According to Reuters, Citigroup led the losses of the big banks Wells Fargo, Bank of America and Goldman Sachs fell by around 4% each. JPMorgan Chase and Morgan Stanley fell by 2.5% and 3.5% respectively. The declines have been taking place for several days, as the S&P 500 Banks Index, which tracks the movements of 21 banking stocks, has dropped by 7.2% so far this month. The KBW Regional Banking Index also reflects the poor performance of these companies' shares, with falls of up to 7.6% in the same period. Thus, fear of a recession has caused investors not only to move away from the technology sector, but also of the banking industry, an area closely linked to the economy. “The economy is potentially slowing more than people expected,” the news agency said in a statement. “Economic data released last week, which revealed rising unemployment and weak manufacturing trade, affect the functioning of loansrevenue growth and credit quality,» recalls Jason Goldberg, banking analyst at Barclays. This explains why the area where lenders move is one of the most feels more pressure in recessions. Financial activity tends to be curtailed by rising interest rates. This, while demand for loans is contracting. due to rising unemployment and low profitability. Fears of an economic recession have been affecting bank stocks since October of last year. What is happening is clear to some analysts, who have been warning for some time that if the regulator moves interest rates from extremely low to high in just one year, “it is obvious that banks will be in trouble.” The comment is from macroeconomist Lyn Alden, who thinks that the banking situation is a reflection of the approaching collapse of the dollar, and in light of this, she recommends paying more attention to bitcoin, as BitcoinDynamic previously reported.
The KBW Regional Bank Index also reflects poor performance of bank stocks in recent days. Source: KBW Nasdaq Bank Index.
The collapse of the banks in everyone's mind
Additionally, investors are more nervous as they have memories of the crisis that hit the banking sector in previous years and that had other consequences last year. The collapse of large banks such as Silvergate Bank, Silicon Valley Bank, Signature Bank and First Republic Bank, was largely due to the interest rate hike by the Federal Reserve. The situation does not seem to have improved significantly during 2024. As BitcoinDynamic reported, last June the Federal Deposit Insurance Corporation (FDIC) warned that banks with operational or managerial weaknesses are on the rise in the US. And although the organization cited names, it assured that There are about 60 banks on the verge of collapse. This announcement further increases the fears of clients and investors, especially considering that the banking sector of that nation «continues to face significant risks arising from the continued effects of inflation,» according to the FDIC. That is why in this context of recession, investors are moving away from bank stocks and tending to look for other types of assets, that are not affected by a large loss in value and are classified as safe haven assets. This includes gold and also bitcoin (BTC). And although the digital currency created by Satoshi Nakamoto is also has been affected by this «black Monday»«, with a drop exceeding 13%, is expected to soon Bring out your characteristic resilience. This is a property that has made BTC always stand out in the midst of the critical situations that the economy has experienced –over the last 15 years– one of the main safe haven assetsThat is something that most investors, including those in more traditional sectors, are clear about.