US Bankruptcy - Consider that it has only been a year since two bank failures

 

It has been more than a year since we have had two of the top four bankruptcies in the US. All the top four have been in the financial sector, yet we seem to have shrugged at the big failures from last year. Interest rates are still high. The mark-to-market value of bank portfolios should give any investor pause, yet we move forward with tight credit spreads and high equity prices. 

The bank ETF, KBE, is flat over the last two years, and KRE, the regional bank ETF, is still down 20% over the last two years but the important issue is that from the financial sector there can be contagion into the real economy. It may not happen suddenly, but the potential for financial drag may be higher than what is currently priced in the market. The potential for the repricing of credit if rate continue to stay high and growth slows should be considered.