Fisher Investments CEO Ken Fisher

Irrational Fears You Can Bank On

Folks freak out on bank stocks easier than most. You should game that.

This story appears in the November 2, 2015 issue of Forbes.

Bank stocks have lagged lately. Folks fear ills from future U.S. rate hikes, an emerging markets currency cliff, continued regulatory overreach and more. But it’s simpler: It’s behavioralism. Our last crisis was ultra-bank-focused, god-awful–and investors usually keep fighting the last war.

In the June 2015 issue of the Journal of Banking & Finance three researchers from Germany’s Technische Universität Dortmund demonstrated that irrational market fears lead investors to panic, sentiment that punishes bank stocks regardless of basics. To put it simply, folks freak out on banks easier than on most stocks nowadays.

MORE: Interested in market analysis for your portfolio? Our latest Stock Market Outlook looks at key stock market drivers including market, political, and economic factors. 

And they’re freaking out now. You should game that. The best thing the Fed could do is hike rates so folks get over crying wolf. Initial rate hikes have never been problematic, ever. Time will tether the emerging market currency fears, like it did neatly in both 1997 and 1998. All these fears are priced. The fundamentals–less so.

Then, too, financials make up 21.6% of the world market (the very biggest weighting) and 16.5 % of the S&P 500. Owning none risks getting left behind. If you dislike banks and you’re right, you could still own a 10% weight and beat the market. If you’re wrong, and banks bounce back as I expect, underweighting materially means you’re toast.

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Ken Fisher has written the Forbes magazine “Portfolio Strategy” column since 1984, making him the longest continuous running columnist in Forbes' history. During this period, he’s made significant market calls—many in direct opposition to Wall Street’s consensus forecast. Though no one can forecast the stock market with absolute certainty, we believe Ken’s record of correct market calls is unmatched by most. We encourage you to examine Ken’s complete Forbes record for yourself. To access Ken’s Forbes “Portfolio Strategy” columns dating back to 1997, please visit For columns prior to 1997, please contact us directly and we would be pleased to provide them upon request. 

Investing in stock markets involves the risk of loss. Past performance is never a guarantee of future returns. Not all past forecasts were, nor future forecasts may be, as accurate as those presented herein. Ken’s Forbes forecasts should not be regarded as a reflection of the performance of Fisher Investments or its clients. Any mention of a particular security is not a recommendation to buy or sell that security. Rather, it is intended to illustrate a point. No assurance can be made regarding the profitability of a security mentioned.

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