When HSBC Holdings (LSE: HSBA) started to pick up in 2021, I really thought that was the beginning of the end of its slump. But since late May, the HSBC share price has turned tail again. As I write, it’s fallen 15%. That’s almost wiped out the stock’s 2021 gains, with the price now up just 3.5% since the start of the year, compared to the FTSE 100‘s gain of 10%. That said, it’s still up almost 12% year-on-year.
I’d usually be happy if each of my portfolio holdings rose by 3.5% every year, on top of the dividends they’re paying me. After all, according to a study done by Barclays, over the past 120 years or so, the UK stock market has produced total returns averaging around 4.9% per year above inflation.
But these are not normal circumstances. And that’s a disappointing result for a bank I’d thought was recovering from the financial sector spanking of 2020.
The HSBC share price is not alone, of course, as the entire UK banking sector is in the dumps. But HSBC has one advantage over, say, Lloyds Banking Group. it’s not beholden to the UK economy, as the domestic-facing Lloyds now is. And that, I hoped, would offer some protection against the economic uncertainty that’s ahead of us on these isles.
But over the past two years, even Lloyds shares have wiped the floor with HSBC. Lloyds is down an admittedly disappointing 11%. But the Hong-Kong based HSBC is still on a 33% slump over the same period.
HSBC share price performance
The two are closer together over five years. HSBC has dropped 28% in that timescale, against Lloyds’ 24%. And that reminds me of one lesson. It’s a waste of time fretting over what happens on a yearly basis, or how different stocks react to specific short-term crises (and two years is short term in the investing world). No, it’s the long term that matters, and I should be thinking only of the next decade or so.
But though that kind of outlook makes a lot of sense, we don’t all have the cool demeanour needed to think like little Warren Buffetts. He’s good at ignoring what’s happening this year. But I confess I still find it hard.
Funnily enough, my Motley Fool colleague Stuart Blair invoked thoughts of the Sage of Omaha when he examined HSBC recently. Stuart was impressed by HSBC’s first-half figures, and I am too. The recorded pre-tax profit of $10.8bn came in 150% ahead of the previous year, and that’s not something to sneer at.
A buying opportunity?
Is the HSBC share price weakness related to its focus on the Chinese sphere? It must be, surely. We are seeing growing political tension between the Asian giant and the West. And I really do see a risk that global posturing could keep Asia-based stocks depressed.
But in the long run, I just don’t think I can buck the market. Various flavours of politician have singularly failed to do so throughout history. I reckon the market will win through, especially if world economies enter a post-Covid inflationary phase. So yes, the current price weakness looks like a buying opportunity for me.