- Morgan Stanley and Charles Schwab stock are top picks after the week’s strong sell-offs, Sandy Weill, former Citigroup CEO, told CNBC on Friday.
- Bank stocks notched outsized losses on Thursday after the Federal Reserve projected near-zero rates could last through 2022. Such policy cuts into firms’ earnings by lowering the amount of revenue made through loans.
- The sector “is in very good shape,” Weill said, praising the two firms for their “building up of assets” and “recurring income.”
- Watch Morgan Stanley trade live here.
- Watch Charles Schwab trade live here.
Bank stocks joined major indexes in sliding through the week as investors grew cautious of economic reopenings taking place too hastily. The equities tumbled further during Thursday’s outsized sell-off as investors braced for years of near-zero rates cutting into the sector’s earnings. Net interest income serves as a key revenue stream for major firms, and historically low rates reduce profits made through loans.
While investors may view the stocks’ tumbling prices as a revival of financial-crisis carnage, Weill said the industry “is in very good shape this time” and primed to ride out the storm.
“I think companies like Morgan Stanley and Schwab are really very good buys for the longer term because they really represent the building up of assets, recurring income,” he added.
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The two financial-sector giants highlighted by Weill have positioned themselves well for recent weeks’ surge in retail investor activity. Schwab announced its takeover of rival brokerage TD Ameritrade in late November. Morgan Stanley soon followed, revealing its purchase of E-Trade in February. While the mergers haven’t yet been completed, growing trading activity on discount brokerages like Robinhood suggests retail investors are flocking back to the market.
Weill also pointed to insurance firms as a potential winning bet for those anticipating an economic rebound. With swaths of retail and office space going unused through lockdowns and slow reopenings, “people will make some decent amount of money owning financial companies, including some property-casualty companies,” the ex-CEO said.
Morgan Stanley traded at $US46.25 per share as of 10:25 a.m. ET Friday, down 9% year-to-date.
Charles Schwab traded at $US36.46, down 23% year-to-date.
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