Now that interest rates have increased wouldn't you expect the likes of SLF and MFC etc to benefit sufficiently to tilt them towards improved momentum? Lots to worry about out there - is it just tunnel vision - the "fear" and worry being more prominent than fundamentals at the moment ?
Thank you
A higher interest rate environment should tend to benefit financials, especially insurance companies, as they can get more yield from their investment portfolios. On the other hand, the equities market is also under more pressure in the short-term, as fixed income becomes more attractive. Insurance companies tend to have some, often substantial, exposure to equities.
Having said that, fundamentally, high rates should be a net positive for the financials. This has not really occurred this cycle, though, as investors have worried about recession, wars, and everything else. But it still could, once some underlying fears subside. Markets do often overreact, and valuations for the group are near historical lows. ANY positive news could see an amplified impact because sentiment is so bad.
Still, we think investors need a long term view for these tailwinds to reflect positively for the sector.