Even though higher rates are positive for the Financials sector, for 22Q1 earnings growth rates are estimated to come out to -19.10%. Also, for the first time in over a year, the PEG ratio of the financials sector recently surged, trading higher at 1.6x vs the S&P's 1.4x, pricing in that future earnings will be smaller.
67% of the Financials sector's constitutes are trading 0-10% off their ATH's and 37% are trading 0-5% from their ATH's.
I guess my question is, is why has the Financials sector outperformed the market (with the assumption that this outperformance is due to the anticipation of rate hikes) but earnings growth is expected to decrease even though rate hikes are an overall net positive for banks?
Is this because the market is anticipating the Fed Funds rate to become a fast-tightening cycle? Potentially slowing future growth and spurring a recession?
I don't understand why/how the market has decided to flood into Financials recently due to rate hikes, despite data suggesting future growth will be lower even *with* rate hikes?
Are you bullish/bearish on the Financials sector for this year leading into 2023? Bullish/bearish on banks/diversified financials/insurance?
I apologize. My knowledge of this sector is spotty and I'm trying to build a mid-to long-term view of banks. Interested to hear everyone's thoughts.
For reference, I'm looking at this when I'm looking at future growth estimates: https://lipperalpha.refinitiv.com/wp-content/uploads/2022/01/TRPR_82221_629.pdf
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