Our outlook for financial-services stocks

Increasingly bullish sentiment means investors must pick their spots carefully.

Jim Sinegal 3 October, 2013 | 6:00PM
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With a price/fair value estimate ratio of 103% for the sector and a number of macro headwinds still blowing, financial-services bargains are few and far between.
Interest rates remain a key factor for companies in several industries.
Capital concerns have diminished in Europe, but uncertainty remains.

At 103%, Morningstar's aggregate price/fair value estimate ratio for financial-services stocks in the United States reflects the increasing bullishness of market participants, in stark contrast to the fears that drove down valuations only two years ago. Indeed, the sector's price/fair value ratio has increased from 70% to 103% over that time. In our view, investors would be wise to pick their spots carefully when adding to positions in U.S. financial-services firms at this time.

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Jim Sinegal

Jim Sinegal  Jim Sinegal is a senior equity analyst for Morningstar.

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