Here at The Motley Fool we've been saying it for a while…
Bank stocks are not a buy.
The writing is on the wall…
Based on their current valuations, big bank stocks are priced for exceptional growth.
There's only one problem, it's not going to happen.
But don't take my word for it…
Here's what Commonwealth Bank of Australia's (ASX: CBA) CEO Ian Narev said about the outlook for the Australian economy a week before he offloaded $751,000 worth of his own bank's shares…
"The volatility of the global economy continues to undermine confidence, particularly the impact of lower commodity prices on national revenue… Weak confidence is a significant economic threat. Businesses need the certainty to invest to create jobs, and households need a greater feeling of security."
CBA isn't the only top Aussie bank to issue a dire warning to investors. Australia and New Zealand Banking Group (ASX: ANZ) recently issued a report showing Australia's resources sector spending is expected to drop 60% in the next three years.
The ripple effects of the resources slowdown have not finished yet.
Unemployment is tipped to rise further in 2015 and 2016.
As ANZ Chief Economist Warren Hogan said yesterday, there could be reason to believe the Reserve Bank of Australia's interest rates will hit 1.75% by year end.
Sure, lower rates are helping Australians pay down their record-high household debts, but unemployment is the key risk here.
In my opinion, regardless of net immigration and population forecasts, higher unemployment places house prices in a precarious position.
Today The Australian Financial Review reports Goldman Sachs analyst, Matthew Ross, has downgraded the banking sector to "underweight" from "neutral" citing, "significant risks."
His downgrade follows Citibank equity strategist Tony Brennan last month questioning whether the big banks were in "bubble territory" and the investment bank's subsequent "sell" recommendation for each of the Big Four.
According to the Wall Street Journal, three analysts had buy ratings on CBA shares three months ago, whilst only two had sell ratings.
Fast forward till today and only one has a buy rating on CBA whilst four recommend selling.
Should you hold or sell?
Obviously, the big banks aren't going to disappear overnight. But big bank investors must objectively weigh up the facts. Currently they're telling us to get ready for an economic slowdown. So in my opinion, right now could be a good time to look at other opportunities.
