fluctuations known banking industry in recent weeks, despite a temporary rise last Friday, bank shares have approached a critical milestone, namely 2008 accident. Market participants point to this and warn that a massive sale of US bank shares threatens to lower the sector below critical levels. In this case, they warn that there will be big repercussions for the stock markets in general.

With her collapse Bank of the First Republic fueling concerns about the solvency of regional banks, the financial sector is retreating, leaving the benchmark Wall Street index on the verge of falling below the highs of 2007. After the 2008 crash, it took more than a decade for the index to regain lost ground, Bloomberg notes. .

As hedge fund manager Jim Roppel, founder of Roppel Capital Management, points out, the financial sector index has been above its 2007 high since January 2021. stock market.

This is expected to put additional pressure on banksbecause they would be forced to maintain higher reserve funds and limit borrowing. However, in this case, they will further burden the US economy, which is already dangerously flirting with a recession. The reason, of course, is largely the sharp increase interest rates in which the Federal Reserve has acted over the past 14 months to stop the most aggressive inflation from the last 40 years. Jim Roppel’s comment is typical that there is no aggressive market rally when bank stocks are in free fall. He characteristically added that “it looks like an Olympic athlete with concrete bricks around his legs.”

It should be noted that last week, US bank executives called on the US Securities and Exchange Commission to investigate whether abusive practices of so-called short selling, as well as market manipulation, played a decisive role in the fall of bank shares. . They requested that appropriate investigations be carried out, as well as that appropriate measures be taken to eliminate them.