Bank Stocks Look Worse Than Banks Do

One way to think about it is that the stock market is supposed to be efficient and the market for bank deposits is not. The point of the stock market is that a lot of well-informed hedge fund managers and hard-working analysts and Reddit-reading day traders are all competing with each other to find out information about each company and use that information to determine the fair value of its stock. The price of a stock changes each second to reflect the information and views collected by the market, and if the market is working well then that price reflects the collective best guess at the long-term value of the company. In practice the market sometimes tries too hard, and stock prices bounce around more than is justified by changes in fundamental information, but this is the goal.

The point of a checking account is that you put your money there and don’t think about it. You don’t compete with a bunch of hedge fund managers to understand your bank’s financial statements; you don’t stay up late reading Reddit for clues about its business prospects; you maybe aren’t even aware of the interest rate that it pays you. A checking account is not a high-risk, high-reward financial instrument that you have spent a long time doing due diligence on. It’s just money in the bank.