Why Charles Schwab Fell 32% in the First Half of 2023
Shares of the large brokerage firm Charles Schwab (NYSE: SCHW) fell nearly 32% in the first half of 2023, according to data compiled by S&P Global Market Intelligence. Like many others in the banking sector, the stock sold off significantly after the banking crisis erupted in March.
After several banks in the U.S. failed, investors started to put all bank balance sheets under a microscope. Specifically, most banks had invested lots of excess liquidity into bonds prior to the Federal Reserve raising interest rates. Those bonds are now heavily underwater because bond values and yields have an inverse relationship.
These are just paper losses and will be recouped as long as banks can hold the bonds until maturity. But with deposit costs rising and deposits on the decline, investors are worried about banks that might have to sell the bonds at a loss to cover deposit outflows. This dynamic played a big role in bringing down banks earlier this year.
Source Fool.com
