Investment bank and brokerage shares have been under pressure in recent weeks, hurt by the fallout from subprime-related problems at The Bear Stearns Companies Inc. (NYSE: BSC) and more general worries about a far-reaching credit crunch.
Since July 17, the Amex Securities Broker/Dealer Index has fallen by more than 17%.
When compared to other financials, however, the shares of Wall Street firms have held up remarkably well. In fact, the group is not far off its highs relative to the S&P 500 Financials Index (which has an equivalent exchange-traded fund, or ETF (AMEX: XLF)).
Even so, the selling of late has caused a measure of technical damage, and the relative chart suggests that broker-dealer shares are poised to play downside catch-up with other hard-hit financials.
Under the circumstances, investors should be cautious about trying to catch this particular falling knife.
Michael Panzner is a 25-year veteran of the global stock, bond, and currency markets and the author of Financial Armageddon: Protecting Your Future from Four Impending Catastrophes and The New Laws of the Stock Market Jungle: An Insider's Guide to Successful Investing in a Changing World.
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