Spot The Odd One Out

Tyler Durden's picture

The major US financial stocks have generally rolled over heavily post their stress-test exuberance catching up to credit's much more sombre reality the whole time, however - who is right? There remains massive divergences among stock performance, e.g. Morgan Stanley -4.9% YTD or Bank of America +35% YTD and while some individual names have caught up to their credit pricing, US financial stocks have yet to catch up to the reality that broad US financial CDS markets have been pricing for two months...

YTD equity performance of US major financials...

US (and Europe) financials stocks vs CDS performance...

and while overall stocks look expensive to credit still (though catching up recently), BofA has actually normalized (from its near 80% YTD short-squeeze gains) back to CDS levels - once again - credit was right all along...

 

Charts: Bloomberg