Forbes - - In­vest­ing -

Bank stocks have lagged lately. Folks fear ills from fu­ture U.S. rate hikes, an emerg­ing markets cur­rency clif, con­tin­ued reg­u­la­tory over­reach and more. But it’s sim­pler: It’s be­hav­ioral­ism. Our last crisis was ul­tra-bank-fo­cused, god-aw­ful—and in­vestors usu­ally keep fght­ing the last war. In the June 2015 is­sue of the Jour­nal of Bank­ing & Fi­nance three re­searchers from Ger­many’s Tech­nis­che Univer­sität Dort­mund demon­strated that ir­ra­tional mar­ket fears lead in­vestors to panic, sen­ti­ment that pun­ishes bank stocks re­gard­less of ba­sics. To put it sim­ply, folks freak out on banks eas­ier than on most stocks nowadays.

And they’re freak­ing out now. You should game that. The best thing the Fed could do is hike rates so folks get over crying wolf. Ini­tial rate hikes have never been prob­lem­atic, ever. Time will tether the emerg­ing mar­ket cur­rency fears, like it did neatly in both 1997 and 1998. All these fears are priced. The fun­da­men­tals—less so.

Then, too, fnan­cials make up 21.6% of the world mar­ket (the very big­gest weight­ing) and 16.5% of the S&P 500. Own­ing none risks get­ting left be­hind. If you dis­like banks and you’re right, you could still own a 10% weight and beat the mar­ket. If you’re wrong, and banks

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