This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
See Cramer's multi-million dollar portfolio for FREE and get his new book Get Rich Carefully! Learn More

Where to Hide When Bank Stocks Bomb

NEW YORK (TheStreet) -- A clear case can be made that the fourth quarter looks pretty weak for bank stocks, but where should investors turn?

Uncertainty over the elections, the implementation of health insurance requirements for business, and the "fiscal cliff," are all weighing on bank stocks, as commercial loan growth -- a main story for large U.S. banks over the past year -- looks to be drying up until the first quarter of next year, as businesses take a wait-and-see approach to expansion plans.

The fiscal cliff is the possible year-end expiration of the income tax cuts -- including the 15% maximum tax rate on qualified dividends -- signed into law by President George W. Bush and extended by President Obama in 2010, as part of the compromise with Congress to raise federal debt ceiling limit. The 2010 budget deal also requires major federal budget cuts beginning in 2013, unless Congress acts.

With the threat of the U.S. economy slipping back into recession from the combination of tax increases and federal spending cuts, most analysts expect a congressional compromise to extend the tax cuts again and avoid the spending increases, but not until very late in the fourth quarter.

Professional investors are taking different approaches in handling a possible short-term meltdown for financial names. Some say that the long-term story of economic recovery is intact, and that banks should benefit over the next couple of years from the housing recovery, as well as a "coordinated global period of economic recovery," according to Fifth Third Bank senior vice president and chief investment strategist Jeff Korzenik, who favors "a balanced approach," to investment allocation and says "financials, energy and healthcare are always affected by elections."

"We take a little bit different view," Korzenik says, "and think that by the fourth quarter of next year, the economy will be almost like the old days."

"We see the green shoots in China," he says, "and the U.S. housing recovery will be in full bloom" by the end of 2013.

Among the banks, Korzenik still likes JPMorgan Chase (JPM), and American International Group (AIG), "where you have an interesting buyback story, so we think there are places to be, in those sectors, despite all the short term problems."

Stock quotes in this article: JPM, AIG, YUM, LO 

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
DOW 16,455.45 -46.20 -0.28%
S&P 500 1,874.91 -0.48 -0.03%
NASDAQ 4,130.8520 +3.8850 0.09%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs