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Quarter-End Insights

Financial Services: Interest-Rate Expectations Have Pressured Performance

About half of our banking coverage is trading at 4 or 5 stars.

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The Morningstar Global Financial Services Index has underperformed the Morningstar Global Markets Index over the previous year (negative 7% compared with 1%) and has underperformed in the previous three months (8% compared with 11%). We attribute most of the underperformance in the financial sector over the past year to 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 affects companies that have fee-based assets, like asset managers and wealth management firms.

Lower rate expectations and asset prices are to blame - source: Morningstar Analysts

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