Quote of the Day: The Fed and the Financial Sector

Bloomberg sees financials as the sector to benefit the most under the new Fed regime. As evidenced by it being our current top sector weighting, we happen to agree (although a financials-friendly Fed is not the only thing that has us bullish on the space):

(Bloomberg Intelligence) -- Reflecting greater growth prospects after the U.S. tax overhaul, monetary policy appears set for a more hawkish tone in 2018. Increased market volatility may be the first sign of a sea change for stocks, while a divergence between the dollar and interest rates is also likely to alter equity-portfolio performance. As the year proceeds, it seems likely that new Federal Reserve Chair Jerome Powell will attempt to offset tighter policy by loosening the regulatory reins.

Equity-market valuations are likely to suffer with Fed tightening this year, but the outlook for 18% S&P 500 EPS growth in 2018 should more than offset the pressure on stock multiples. Among sectors, financials appears most likely to benefit from the new central-bank regime. (03/01/18)