The bank stocks are at it again as they make another new 52-week relative performance low compared to the broad market. It’s a perennial issue. Over the last year the KBW Bank Index, an index of 24 of the largest US banks, has underperformed the S&P 500 by 30%. Over the last 10 years, the banks have returned just 51% as much as the broad market.

You’d think at some point these stocks could catch a break, but that would be to ignore the fundamental headwinds facing these institutions. If we use the yield curve as a proxy for bank profit margins, it’s no surprise that the banks have underperformed by such a large degree. Indeed, with a 10Y-2Y US Treasury spread at just 48bps, the margin generated by borrowing short and lending long has all but evaporated. The below chart plots the 10-2 yield curve spread in red against the relative performance of the KBW Bank Index vs the S&P 500.