Like all financial institutions, Schwab’s stock price is subject to the changes in prevailing interest rates. As rates fall, banks make less money as the spread between borrowing and lending (profit) shrinks. With inverted yield curves, falling yields, a global economic slowdown and the possibility of a recession in the forefront, financial institutions have been one of the weakest performing US sectors.
Schwab’s long-term chart below looks quite similar to many and reflects the current weakness in financial stocks. It has broken below its long-term uptrend line and sits right on the neckline of a bearish reversal head and shoulders topping pattern. If this pattern were to trigger and play out, its target is way down at T1, more than 50% below yesterday’s closing price. That is a huge drop and unless there is a major catastrophe, there is a low probability it comes to fruition. For it to occur, a catalyst (such as a full-blown trade war) triggering a global recession would need to be present. Anything is possible but unlikely to occur any time real soon. If never, it will go down in the books as another false signal breakdown. As of right now, it should be only viewed as a possibility (apparently an escalation to trade confrontation has been put on hold by POTUS until Dec 15th) but without question a concern all investors should be watching closely because global recessions are not selective in their damage to portfolios.