In late March investors were given a scare after a yield curve inversion in U.S. and Canadian 10-year bonds. This suggests that there is a 25-30% chance of a recession in the next 12-18 months. Of course, critics have been quick to point out a strong job market, and steady if slowing growth.
Canadian banks had a bumpy finish to March. Does this mean it is wise to avoid buying some of the top financial institutions in April? Let’s look at the top two in Canada.
Royal Bank (TSX:RY)(NYSE:RY) is the largest bank in Canada. Its stock was up 1.42% in early afternoon trading on April 1. Shares have climbed 7% in 2019 so far. The stock had an RSI of 50 as of this writing, which puts it in neutral territory to start the first full month of spring.
Toronto-Dominion Bank (TSX:TD)(NYSE:TD) is the second-largest financial institution in the country. Shares of TD Bank were up 1.89% in early afternoon trading.
The stock is up 6% in 2019 so far. Economic turbulence in the United States is a big risk for TD Bank, which boasts the largest U.S. footprint of any Canadian bank. The U.S. is nearing the longest recovery in modern history, which should have investors thinking about when a pullback is due. With luck, it will be a mild retreat.
The yield curve inversion should drive investors to be cautious, but there is still money to be made in this stock market. Royal Bank and TD Bank have room to run in 2019.
