Financial stocks have been in the spotlight as the best-performing group in 2024, with the S & P 500 financial sector surging 36% so far this year. Investors are optimistic about the prospects of financial companies following President-elect Donald Trump’s election victory and promises to deregulate business. This month alone, the group rallied 10%, outpacing other sectors.
According to industry experts like Sam Stovall, chief investment strategist at CFRA Research, financial stocks have good momentum and earnings growth prospects under a Trump administration, with potentially less stringent regulations. The technical setup for financial stocks, which have broken out to new highs and are in a bull market, is also encouraging.
Rob Ginsberg, a technical analyst at Wolfe Research, believes that fast-growing financial technology companies, or fintech companies, could particularly benefit from the current market conditions. Fintech stocks are expected to outpace the entire financial sector, with potential rallies of 10% to 15% over the next 12 months. Ginsberg specifically mentioned companies like Block, PayPal, and Toast as bullish opportunities in the fintech space.
While financial stocks may face some initial punishment in the event of a market correction, Ginsberg remains optimistic about the overall bullish trend in the sector. He believes that even with elevated sentiment levels, the base case for a bull market in financial stocks is likely to continue.
Looking ahead, there is a consensus among experts that financial stocks, especially in the fintech space, have strong growth potential in the coming months. Names like Block, PayPal, and Toast are expected to see significant gains, with the possibility of outpacing the overall financial sector. Investors are advised to keep an eye on these companies for potential investment opportunities in the evolving financial landscape.
