There are concerns over Trump’s ability to pass his planned tax cuts and deregulation initiatives, which have been supporting the recent bounce in the financial sector.
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.
“The sector’s price-earnings multiple is now at the lower end of the historical range relative to the S&P 500 during economic recoveries. Banks are trading at 10.8 times 2018 estimated earnings, which is 64 percent of the market’s P/E versus the 59 to 75 percent range in the past 25 years during rate hike cycles,” according to the JPMorgan note cited by CNBC.
The Federal Reserve is expected to hike interest rates at least one more time this year, which could also be a benefit for bank ETFs. Finally.
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