3Q26 Preview: Bank Stocks Reach Correction Territory, Where Do We Go From Here?

Deutsche Bank's 3Q26 preview for US SMID cap banks. Since the recent BKX high on Aug 14, bank stocks have underperformed the broader market and reached correction territory, with the BKX -10% vs. the S&P 500 -1%, likely driven by a combination of concerns over geopolitical risks, sustainability of earnings, rising rates and the upcoming US midterm elections. The rise in interest rates is the biggest area of concern: the forward curve prices in 3-4 Fed hikes by end-2027 and DB's economics team forecasts two more 25bp hikes;