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Quarter-End Insights

Financial Services: Value in Banking and Asset Management Firms

Moderating expectations for interest rate hikes and lower asset prices have created some buying opportunities in some financial firms.

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The Morningstar Global Financial Services Index (Exhibit 1) has fallen 15% in 2018 through Dec. 20, underperforming the broader market because of moderating expectations for higher interest rates, which primarily affects banks and companies that earn interest on securities portfolios, and the general decrease in asset prices, which primarily affects companies that have fee-based assets, like asset managers and wealth management firms.

Exhibit 1: Lower rate expectations and asset prices are to blame

Michael Wong does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.