The banking sector is mired in a wave of selling, with the KBW Nasdaq Bank Index (GBKX) down 27% from its February 6 peak, officially entering a bear market – a status that is defined as a 20% drop from recent highs. The broader S&P 500 index has also fallen, down 17% from its February 19 peak, investing.com reports.
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Historical context
There have been 29 bear markets since 1966, or about one every two years. During such periods, bank stocks have lost an average of 30%. The current downturn has lasted nine weeks, shorter than the typical 24 weeks for such episodes in the past. Historically, the sector has seen deeper dips: BKX has fallen more than 40% eight times, including three times during the Great Financial Crisis and again during the COVID-19 pandemic.
Dynamics of recent years
BKX has had a rollercoaster ride in 2022, with the index initially falling 36% and then rebounding 21%, technically kicking off a bull market. But the joy was short-lived, with a further 38% drop resulting in a 51% decline from January 2022 to October 2023. That plunge exceeded 40%, making it one of the biggest sell-offs in banking history.
- Stock market