Some strategists also argue that the financial sector may be a good area to look at this time around, given the potential for growth in a rising rate environment, along with potential tax and regulatory changes under the Donald Trump administration.
The Trump administration’s expansionary policies would be especially beneficial for banks since the segment is sensitive to the overall economy. Moreover, the expansionary policies have fueled bets of increased Federal Reserve interest rate hikes to rein in a potentially overheating economy and rising inflation, which further supports lending revenue and their bottom line among bankers and insurers.
“In the long term, however, he is more constructive. Wald sees deregulation as a plus for the financials, along with the belief that ‘economic vitality’ will become apparent in 2018 as the Federal Reserve is expected to raise interest rates, which will ‘bode well over the next three to five years for the financials,’ according to CNBC.
Financial sector valuations still look relatively cheap, compared to the broader market. The sector’s valuations are still about 25% below the average since the early 1990s.
For more information on the financial sector, visit our financial category.