Commonwealth Bank of Australia (ASX: CBA) endured a setback during yesterday's session which saw its shares retreat below the $87 mark after nearly breaching the $89 mark a day earlier. It's fallen marginally further today to trade at $86.50.
The bank was one of the primary organisations responsible for the S&P/ASX 200's (Index: ^AXJO) (ASX: XJO) enormous growth spurt between 2009 and early 2015 as its profits soared thanks to the low interest rate environment and the subsequent low impairment charges. It hit a fresh all-time high of $96.69 earlier in the year and many investors believe it can get back to that point in the near future.
Indeed, there is every chance that it could – especially if the Reserve Bank does cut interest rates further, which some economists believe will happen. But while short-term gains are possible, I don't see much of a case for long-term market-beating returns from today's price level.
The fact is, it's the wrong time of the cycle to consider buying the bank's shares. Impairment charges can't fall much further while competition and the stricter regulatory environment are both causing headwinds too, restricting the bank's ability to continue growing earnings, and potentially dividends as well.
Although there is potential for a small gain in the near-term, long-term investors would be advised to put their money to work elsewhere, where I believe superior gains are more than achievable.
