NEW YORK (
) -- In the world of financial stocks, it seems that logic has been turned on its head.
Firms with the largest and most extensive government support have added the most value recently, while those that are less dependent on taxpayer largesse haven't fared quite as well. In fact, an increasing portion of bets are being made against some firms that have stripped away their shackles from the Troubled Asset Relief Program.
In a single trading day, after the Treasury announced
, the two stocks gained 21% and 27%, respectively.
American International Group
has gained 12% since a report that CEO Robert Benmosche believes it will take at least two years for the insurer to repay $80 billion in bailout funds.
On the other hand, since announcing plans to repay bailout funds on Dec. 2 -- and doing so shortly afterward --
Bank of America
shares have declined 2%. Since doing the same on Dec. 14,
has lost 8% and
has added 5%.
has skyrocketed recently, more than tripling in the first two weeks of December. Traders have
increased bets against Citi and Wells Fargo
, which announced plans to repay TARP over six months ago, and whose performance has benefited from a longer-term rally in financial stocks, haven't performed as well as Fannie or Freddie. Their shares added 18% and 10%, respectively, since reports on June 9 that their plans to repay TARP had been approved.
, those results are subdued at best.
If any logic can be ascribed to the trends, it seems that investors remain concerned about near-term economic growth and financial stability. The
is starting to unwind its incredibly loose monetary policy, meaning the period of free money and highly profitable spreads for banks is coming to a close. Without the support of TARP, banks have escaped dividends and pay restrictions, but they're also on their own if severe problems strike again.
The stock market clearly has fewer bears overall. Major indices have hit new 2009 highs during the recent Santa Claus rally. But much of those gains aren't coming from financials, they're coming from the health care sector and seemingly impervious tech stocks.
In the meantime, credit headwinds persist and joblessness remains high. The housing market which started all the problems is getting better, but is still on shaky ground. The market seems less worried about commercial real-estate losses than it once was, but the extent of CRE damage still lingers as a big question mark.
All of those issues may hold back financial stock performance until banks can prove their ability not just to stand on their own, but to amble on without government assistance.
Written by Lauren Tara LaCapra in New York