Editorial Contributor
Dominic Picarda is a Chartered Market Technician and has been responsible for the co-ordination of the Investor’s Chronicle’s charting coverage for 4 years. He is also an Associate Editor of the FT and frequently speaks at seminars and other trading events. Dominic holds an MSc in Economic History from the LSE & Political Science.
Dominic Picarda’s Technical Take banking sector Most of the dirtiest words in the English language contain four letters. Following the financial crisis, “bank” is not far off qualifying as an obscenity. The industry is reviled in many quarters of society for its role in bringing about the credit crunch, for the billions of pounds of taxpayers’ money that it has since received, for the lavish bonuses that it continues to pay its top employees, as well as a series of other lesser scandals. Shareholders in the UK banks should be more aggrieved than most at the industry. As of 19 October, the sector as a whole has lost almost two-thirds of its value since its early 2007 peak. After coming back from the dead in early 2009, it has struggled pretty much ever since, save for a few all-too-brief bursts of outperformance here and there. Admittedly, banking has been a pretty decent bet so far in 2012, having gained roughly a quarter since the start of the year. I attribute this performance largely to the European Central Bank and America’s Federal Reserve. Its two major advances have coincided with the ECB’s liquidity—pumping initiative in the first quarter of the year, and then latterly the Fed’s recent commitment to prop up the US mortgage market. In the short term, this rally could well continue. US Quantitative Easing and the forthcoming bailout of Spain should help further improve investors’ sentiment towards financial stocks. The easing of recessionary conditions in Britain should also make life easier for the banking sector. However, a return to the go-go days of late 1990s or early 2000s is not on the cards, in my view.
56 | www.financial-spread-betting.com | November 2012