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Banks Stocks Will Get Going When the Yield Curve Steepens: Investing Expert

No part of the banking sector has proven a good investment this year. The yield curve is hammering the sector. But see which area of banking just might have the advantage and why.

The entire banking sector was exempt from the stock market rally in the first half of 2018, and these dogs of the U.S. market may not have a great outlook for the near-future either. 

"I don't necessarily see that easing up for the first quarter of 2019," said JJ Kinahan, chief market strategist of TD Ameritrade. 

Goldman Sachs Group Inc. (GS) - Get Goldman Sachs Group, Inc. Report is down 27.65% year-to-date. Citigroup Inc. (C) - Get Citigroup Inc. Report is down 16.33% this year. JPMorgan Chase & Co. (JPM) - Get JPMorgan Chase & Co. Report is up 0.27% this year. The SPDR S&P Regional Banking ETF (KRE) - Get SPDR S&P Regional Banking ETF Report is down 10.57% this year. 

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The flattish yield curve has really hurt bank stocks this year, Kinahan said, and while some have thought there might be shelter in regional banks, that hasn't been the case. The trade war could have caused investors to pile into regional banks, which are somewhat shielded from international trade issues, but the yield curve has hurt them too. "The regional banks have really taken it on the chin with that," Kinahan said. 

"That gives some momentum to the larger banks," he said. But that momentum hasn't really kicked in either, because "if the long end of this curve doesn't come up, it really becomes more difficult for them." 

Which group has the advantage? Maybe the bigger banks have it, because "they've become so well managed," he said.   

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