Financials have been lagging the broader market, so should investors still be putting their money into the sector? David Kotok, chairman and chief investment officer of Cumberland Advisors and CNBC contributor, and Peter Costa, president of Empire Executions and CNBC market analyst, shared their outlooks.
“The financials led the market, and now they’re going to lead it down,” Costa told CNBC.
“The banks who are getting money for practically nothing and not lending, that’s one of the reasons the economy is going to take a lot longer [to recover].”
Costa said he is not a fan of the banks and prefers the insurance companies instead, because the latter have been able to dig themselves out from the crisis. He sees a lot of “residual benefits of owning an insurance company.”
“In the long-term, Bank of America and Citigroup would be a good play—but not a lot of people look that far ahead,” said Costa.
“Something good will come out of Citibank; and for Bank of America, they’ll get through this and it will be a $30 stock in another 3 years.”
Kotok agreed that it will take the financials a while to restore, normalize and to lead another big leg upward.
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In terms of ETFs, Kotok said he does not own the big bank ETF, KBE .
“It may be a buy in the future, but we wouldn’t buy it today,” he said. “We also don’t own regional banks — KRE — because we’re worried about commercial real estate issue, which is not fully revealed.”
However, Kotok said he does own KIE , the insurance ETF, and the capital markets ETF, KCE , because they’re “ahead of the pack” coming out of the financial mess.
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No immediate information was available for Costa or Kotok.