The Dow Jones Industrials Average (INDEX: ^DJI) got sucker-punched early this morning and fell down over 1%, but it's recovered about half of the lost ground and is now trading down 0.98%. It's the same old song and dance that we've seen for months now: Europe, with a dash of concern about slowing growth in China. At this point many investors feel like they've been watching "My Big Fat Greek Blowup" on repeat and could probably recite most of the lines; debt here, political impasse there, turmoil in the streets, you get the idea.
These worries have flowed through to economically sensitive sectors like banking and energy, with both being the two worst performing sectors today.
It's not just Europe
The weakness that's being seen in the banking sector can't be squarely placed on the shoulders of the Greeks though, as JPMorgan (NYS: JPM) deserves its fair share of the credit as well. The banking giant recently unveiled a $2 billion trading loss and Chief Investment Officer Ina Drew has "retired" on the news. Shares of the bank have skidded hard since last Thursday's announcement, and continue to drag the broader banking sector with it.
JPMorgan is trading 3.14% lower and Bank of America (NYS: BAC) is down 2.38%. Off the Dow, Citigroup (NYS: C) is dropping 4.29% and Wells Fargo (NYS: WFC) is down 2.5%. Dow Jones investors should consider themselves just a little lucky that financials only make up 9.9% of the index, though, which is far lower than the weightings they'd find on other broad indexes like the S&P or Russell.
At the end of the day I'm of the belief that banking remains incredibly cheap right now. The big finance heavies continue to trade at deep discounts to their historic price-to-book ratios. With that said, though, this sector isn't for those with a weak stomach. Banking will likely continue to be a volatile sector over the next few years. With more regulation a possibility right alongside more potential balance-sheet landmines in the form of mortgage defaults, the level of uncertainty remains high. For those with a high risk tolerance and a long-term horizon, though, financials may be the best sector for you to be in.
One other option
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At the time thisarticle was published Austin Smith owns shares of JPMorgan Chase and has Citigroup warrants expiring Jan. 4, 2019, but has no financial stake in the other companies mentioned here. The Motley Fool owns shares of Citigroup, JPMorgan Chase, and Bank of America. The Fool owns shares of and has created a covered strangle position in Wells Fargo.Motley Fool newsletter serviceshave recommended buying shares of Wells Fargo. The Motley Fool has adisclosure policy.We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.
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