For most, JPMorgan Chase & Co (NYSE: JPM) trading at its pre-pandemic valuation would look like a treat. But David Wagner, for one, still doesn’t find the stock “that appealing”.
Wagner explains his bearish view on JPM
The Aptus Capital Advisors’ portfolio manager is “underweight” bank stocks. Explaining why JPM doesn’t look attractive to him at the current stock price on CNBC’s “Power Lunch”, he said:
You can’t look at JPMorgan from a PE perspective, given the volatility around credit reserves, whether they’re releasing them or starting to build them. One must look at JPM from price to book lens. If you do that, the stock doesn’t look all that appealing.
Last month, the Wall Street bank blamed inflation and the Ukraine war as it reported a massive 42% year-over-year decline in its Q1 profit. The stock is down nearly 30% for the year.
Why is Wagner dovish on the bank stocks?
According to David Wagner, fear of economic slowdown is a bigger headwind for bank stocks at present than rising rates is a tailwind. Defending his bearish view on the sector, he noted:
We expect credit spreads will continue to widen as earnings expectations see large haircuts. And wider spreads can punish bank valuations. Right now, slower growth fears are more than offsetting the benefits of the rising rates.
The U.S. GDP unexpectedly fell at an annualised pace of 1.40% in the first quarter of 2022, adding fuel to the trepidation that the economy is headed for a recession.
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