Following a big sector-led bear market (like 2008), the sector that led down usually bounces back big, then lags—often for years—as investors “fight the last war.”
That’s just what we’ve seen with Financials since the March 2009 bottom, as shown in Exhibit 1. Since the 2009 broad market bottom, there have been sporadic bursts of Financials outperformance, but much more frequent and consistent underperformance.
Exhibit 1: World Financials Relative Performance (Indexed to 1 vs. MSCI World)
Source: Thomson Reuters, as of 3/19/2012.
But this is a backward-looking reflection. What’s important for investors now is determining their expectations for forward-looking performance—for Financials or any sector. From that perspective, Financials faces some potentially positive and negative factors. Here are some considerations:
Weighing potential positives against negatives is critical when forming forward-looking expectations for the sector.
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*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.