At Least for Once, Banks Aren't Worsening a Stock Market Blowup

(Bloomberg) -- For almost two decades, whenever the stock market went wild, banks went a little wilder. But not this time.

During this month’s selloff that sent the S&P 500 Index to its first 10 percent correction in two years, financial shares were some of the least-bad performers. The KBW Bank Index lost about 9 percent from peak to trough.

It passes for a win among lenders, whose balance-sheet quality and profit durability have been under growing scrutiny since the global financial crisis. According to Strategas Research Partners, this is the first time since 2000 that banks have beaten the S&P 500 during a market pullback of at least 10 percent. 

Maybe it’s the perception that share volatility, while painful, will end a two-year slumber that has hurt the trading business for major financial institutions. Or maybe as the rest of the market is trying to come to terms with rising bond yields, banks will be a beneficiary from higher borrowing costs.

Whatever the reason, one message of last week’s histrionics doesn’t seem to be that there is stress in the financial system. And it may be a reason the tumble has lately been looking less brutal.

©2018 Bloomberg L.P.