Reduce Bank Exposure Following Fed Rate Hike, CIBC Says
Investors should reduce their exposure to Canadian banks following the US Federal Reserve's first interest rate increase in three years, CIBC Capital Markets said.Analyst Paul Holden said bank stocks historically perform poorly in rate hiking cycles, with an average decline of 24% during the past seven of those periods."We have not fully embraced the same view as the rate market in terms of the magnitude of further rate hikes and hence are not hitting a panic button for the banks," Holden said in a note to clients."However, we do think it prudent to trim risk / trim market beta given the increasing probability that more rate hikes are coming," the analyst said.Holden recommends reducing bank weight and shifting weight within banks to lower-beta names.
