With recent downgrading of some European banks in is hardly surprising that like technology shares after the TMT bubble burst in 2000, financial stocks are perceived as toxic.
While the technology sector suffered from a perception of overvaluation and irrelevance, among other issues, harder to remember in the wake of the Facebook floatation, the financial sector has to contend with other problems; higher capital and liquidity requirements, litigation, an anemic economic recovery, a sovereign debt crisis and so on.
It has, maybe been an easy decision for asset allocators to apportion less to the sector than their performance benchmarks. Surveys show that investors remain very underweight in the sector, even with the sharp rally in share prices in recent weeks.
We have to remember however that an investment in financials is not automatically an investment in European banks. European banks represent just 16.8 per cent of the MSCI World Financials index, and that includes the likes of HSBC Holdings and Standard Chartered. If you look at just Eurozone banks this falls to 6.3 per cent. At best, the rest of the financial sector has suffered collateral damage, and this is where the opportunities lie. The financial sector is not just banks and even more so, not just European banks.
At Enable our Independent Financial Advisors know that the way to mange your wealth is not just to keep calm and carry on but to keep the bigger picture in mind and spread your assets. Enable’s IFA’s can talk you through the options.
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