Money Morning Global Investing Strategist Martin Hutchinson first warned it was time to bail on bank stocks on Aug. 17. He said the sector was headed for a "catastrophic decline."
"Margins are narrowing, government regulation is increasing, and the outlook for big deals is drying up," said Hutchinson. "In other words: The risks related to bank stocks are as present as they ever were - just the profitability is missing."
Hutchinson was right on with his call. Anyone who heeded his warning saved themselves from the losses U.S. banks have since sustained.
Share prices for many big U.S. banks tumbled in the period between the publication of Hutchinson's article and yesterday's (Wednesday's) market close. Bank of America Corp. (NYSE: BAC) lost 11.6%, Goldman Sachs Group Inc. (NYSE: GS) fell 9.3%, JPMorgan Chase & Co. (NYSE: JPM) 6.5%, and Morgan Stanley (NYSE: MS) 2.2%.
The Standard & Poor's Financials Sector Index now is down more than 18% for the year. Global bank stocks have hit their lowest valuation in 40 years.
And this industry's stock losses are just the beginning of the price pain.
Poor Earnings Reflect Banks' StruggleHutchinson pointed to key factors that would weigh on bank profits, like trading losses, decreased lending, and the overhang of dead mortgages.
This season's dismal bank earnings have supported Hutchinson's forecast.