Unlike in 2008, today's financial system is stable since the vast majority of banks have strong balance sheets and are well-capitalized with ample liquidity, in the firm's view. That means parallels drawn to the turmoil of 15 years ago are an apples-to-oranges comparison.
"We view the sharp price drawdown in S&P 500 Financials as a buying opportunity for investors, particularly given the attractive valuations, dividend attributes, and high quality tilt that continue to underpin the sector," Belski wrote.Although most banks are in solid shape after last month's chaos, investors' knee-jerk reaction to sell in the face of uncertainty has sent the group's valuations down to crisis levels, Belski noted.
"Multiples in the sector have expanded from the levels seen during the back part of 2022, but our absolute valuation composite remains near its long-term average, while our relative composite versus the S&P 500 still sits at a substantial discount," Belski wrote.Those bearish on banks may argue that the group is cheap for a reason. But that's not so, according to Belski and his colleagues, given the health of the financial system and banks in it.
"Dividend attributes among Financials have improved over the past 18 to 24 months, and we believe a continuation of this trend should provide a tailwind for the sector in the months ahead," Belski wrote.
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