FINANCIALS: Private Credit Fears Creating Attractive Values

The big money center banks will report their Q1 earnings this coming week. They are included in the S&P 500 Financials sector, which has been the worst-performing one in the S&P 500 this year to date, down 7.3% through April 10, compared with a broadly flat market over this period (chart). One of the major culprits is the gathering storm in private credit. It has rattled investor confidence in the sector, dragging everything from asset managers to consumer lenders along.

Nevertheless, the stock market is not pricing a systemic financial problem into stock prices. Regional Banks are up 2.6% ytd while Consumer Finance is down 17.2%, a significant spread within a single sector (chart). Diversified banks are off just 2.6%.