Jefferies equity strategist Steven G. DeSanctis on Tuesday lifted the firm’s rating on financial stocks to overweight from market weight in a reaction to bearish sentiment around the sector and the prospect of higher interest rates. “Sentiment is downright awful,” he said. “When flows are this bad, the group rebounds and delivers better than average performance.” The sector offers cheap valuations currently and may be helped by GDP growth of 4% next year. “We think ’22 earnings numbers are very conservative and should move up, keeping the revision ratios above average,” DeSanctis said. M&A activity remains at record levels and could boost performance. Among the stocks in the group, Jefferies spotlighted Ares Management
ARES,
-2.16%,
Carlyle Group
CG,
-2.15%,
First Cash Inc.
FCFS,
-1.01%,
Hancock Whitney
HWC,
-0.67%,
LPL Financial
LPLA,
-0.65%,
OneMain Holdings
OMF,
-1.56%,
Signature Bank
SBNY,
-0.50%,
SLM Corp.
SLM,
-1.54%,
Sterling Bancorp
STL,
+0.10%,
Western Alliance Bancorp
WAL,
+0.90%
and Wintrust Financial
WTFC,
+0.35%.
The SPDR Regional Banking ETF is up 30.9% so far this year, compared to a rise of 16.6% by the S&P 500
SPX,
-1.46%.