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Quarter-End Insights

Financial Services: Bargains Still Hard to Find

In today's market, we think careful stock-picking will be rewarded. Plus, we look at the impact of rising interest rates on banks and of ETFs on the traditional asset management industry.

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  • The financial services sector appears to be fairly valued overall at a price/fair value ratio of 0.99.
  • Rising rates will not translate one-for-one to higher earnings for banks, and the timing of an increase is not as meaningful to our fair value estimates as our belief that rates will eventually rise.
  • While it has been easy so far for most of the traditional asset managers we cover to ignore the growth of ETFs, we think that will change as actively managed exchange-traded products take off.

 

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Stephen Ellis does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.