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Quarter-End Insights

Our Outlook for Financial-Services Stocks

Europe's troubles are casting a dark cloud on the financial sector, but several catalysts for higher stock prices could be on the horizon.

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  • The European debt crisis remains unresolved, leaving us wary of European banks. We prefer better-capitalized names in the U.S. and certain emerging markets.
  • The low, flat yield curve is likely to pressure the earnings of retail brokerages and trust banks for some time, creating buying opportunities for patient investors.
  • A mild hurricane season and increased capital in the insurance sector will have detrimental effects on industry pricing power.

 

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Jim Sinegal has a position in the following securities mentioned above: BRK.B. Find out about Morningstar’s editorial policies.