Argus Research Makes A Bullish Call On Financials

Argus research analyst Jim Kelleher recently discussed the firm’s outlook for the financial sector in Argus’ monthly research conference call. According to Kelleher, the firm is bullish on financial stocks headed into 2017.

“We are currently Overweight on the Financials sector as we expect valuation improvement on better 2017 trends,” Kelleher explains.

He points out that the financial sector has lagged the overall market by more than 4 percent in 2016. Kelleher blames a disappointing rate hike schedule on the lackluster performance. In addition, the surprise Brexit vote sent shockwaves through the financial sector and has injected uncertainty into the global banking world.

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However, with a majority of economists now anticipating another rate hike in December, Kelleher believes financials are well-positioned headed into 2017. He notes healthy consumer and commercial loan growth, solid credit quality, and depressed stock valuations as reasons for optimism in the space. In addition, Kelleher believes that banks have mostly adjusted to the Dodd-Frank regulatory burden and the costs associated with it. Despite the financial burden regulations have placed on the banks, their capital reserve safety nets now make them much safer investments.

Kelleher also believes many non-bank stocks are also well-positioned for rising interest rates.

Argus names the following financial stocks as its top picks:

• JPMorgan Chase & Co. JPM
• Bank of America Corp BAC
• BB&T Corporation BBT
• Fiserv Inc FISV
• Intercontinental Exchange Inc ICE
• Charles Schwab Corp SCHW