Financial stocks tipped to lead market recovery
Stephen van Eyk
Financial stocks will fall further relative to the market during the course of 2008 before leading a market recovery late this year or early next year, according to van Eyk managing director Stephen van Eyk.
Speaking at the research house’s annual conference in Sydney yesterday, van Eyk said the current market downturn is “definitely being financially led and so the upturn will probably be financially led as well”.
“I would think that when financials start to outperform the market later this year it may be a sign that the market itself will start outperforming some time later this year or next year.”
He described the current financially led downturn as “interesting in the sense that financials usually outperform the market in a downturn”.
However, he said earnings of S&P 500 financial stocks “have dropped so far due to all the recent write-offs that the PE [price earnings] is actually going up because prices haven’t dropped fast enough to make up for the drop in earnings”.
“I would say that earnings will continue to drop faster than prices, with the PE going up, and then at some point — maybe late this year [or] early next year — earnings will start going forward again as they build their balance sheets.
“Earnings usually fall for 16 months after a downturn but the market usually starts to rise some time before the end of this period — so really, you would think that the market will start to rise some time later this year.”
Recommended for you
With wealth management M&A appetite only growing stronger, Business Health has outlined the major considerations for buyers and sellers to prevent unintended misalignment between the parties.
Industry body SIAA has said the falling number of financial advisers in Australia is a key issue impacting the attractiveness and investor participation of both public and private markets.
As advisers risk losing two-thirds of FUA during the $3.5 trillion wealth transfer, two co-founders underscore why fostering trust with the next generation is vital to retaining intergenerational wealth.
As advisers seek greater insights into FSCP determinations, what are the various options considered by the panel and can a decision be appealed?
