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Quarter-End Insights

Our Outlook on Bank Stocks

Loan losses are likely to increase as economic activity slows.

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Bank stocks continued to tumble in the fourth quarter, as economic indicators worsened and credit markets ground to a halt. We see little reason for cheer in the new year, as we expect loan losses to rise further and bank earnings to remain significantly depressed. At the same time, we see the downturn as an opportunity to purchase shares of some high-quality, lower-risk banks.

Erin Davis does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.