While the Royal Commission’s final report was touted to rock the financial services industry, the financial sector has defied expectations, according to data from FE Analytics.
Wealth Within chief analyst, Dale Gillham, said the banks traded up the day before the final report, and shares surged again on the Tuesday following the report’s release.
“I have been saying for quite a while that the worst had already been factored in to the share price of the banks, which was confirmed when the report was released,” said Gillham. “Right now, we need to see the dust settle before making a decision to purchase the banks, as it could just be a false rally before they fall away again.”
Gillham said the banks were some of the efficient profit-making machines in the stock market, and, given this, it would not be long before banks were back on top again delivering good shareholder returns.
As well, of the top ten best gains in the top 50 stocks last week, six came from the financial services sector.
According to data from FE Analytics, the S&P ASX 300 Financials sector did indeed lead the sector indices, returning 5.54 per cent last week.
Industrials followed with 3.40 per cent returns, with information technology returning 3.30 per cent, real estate returning 2.94 per cent and consumer discretionary returning 2.35 per cent.
Materials, healthcare, energy and utilities trailed the sectors in terms of performance with respective returns of 1.71 per cent, 1.33 per cent, -0.46 per cent and -1.15 per cent.
But, while financials held steadfast during a shaky week, Gillham said he still recommends investors stay away until they know for certain which direction the sector would move.
“As I have mentioned previously, for the market to continue to rise this year and break through the all-time high, both the financials and materials sector need to be rising at the same time. I am confident that the Materials sector will rise this year, but only if the Australian dollar can hold up and interest rates don’t fall further, otherwise this sector may be a little subdued. The Financial services sector is where the uncertainty lies.”
The chart below shows the performance of the S&P AWSX 300 sectors for February 2019.
