Unfortunately for investors, banks have become a lightning rod for all the economic disaffection of average Australians (read; those not involved in the finance industry). Whether it’s job losses in manufacturing or a lack of pay rises in retail, in the popular imagination these woes are somehow caused by those b****** banks.
Naturally, this makes the banks a popular political target. The calls for a Royal Commission into the industry during the recent election campaign are a case in point. Despite no-one ever spelling out what question an RC would answer, it seemed a vote winner.
So has the PM’s move short circuited these threats to the financial well-being of the sector? This was the topic of a “trader strategy session” late last night. The two views were a) no – the threat is increasing and yesterday’s announcement was a capitulation to internal LNP pressure , with more to come and b) yes – the banks have a good case to make and a public forum will help explain their actions to average Australians.
The case was not won overnight. For more answers, we turn to the primary evidence – the price action. The chart shows the sell-off following the announcement brings CBA to a 38.2% retracement of the recent rally. Further falls from here will favour the “no” vote, a rally the “yes”.