The global fund managers increased their allocation to financial stocks, which include both banks and insurance companies, to an all-time high in December.
What Happened: According to the Bank of America's Global Fund Manager Survey, as reported by Yahoo Finance, investors' allocation to banks increased by 23% points in December compared to the previous month. This resulted in global fund managers being 41% overweight on banking stocks in December, which is the highest since January 2022.
Similarly, the allocation to insurance companies surged by 15% points month-on-month. This represented an overweight position of 20% within the sectors by the global fund managers. It is the highest since February 2014.
Furthermore, the investor positioning relative to their historical long-term positions increased within the financial universe, followed by the U.S. stocks and utilities, according to the BofA survey.
The investors were underweight with respect to their exposure to cash, Eurozone stocks, staples, and bonds.
What Are The Analysts Saying
Mario Georgiou, executive director, head of investments at InCred Global Wealth U.K., in an exclusive conversation with Benzinga, described tax cuts and deregulation as tailwinds to the markets. He considers inflationary policies such as tariffs and immigration impacts as headwinds, leading to a steepening yield curve, and higher term premiums.
"Financials offer an attractive risk-reward and that this recent post-election rally has room to run," added Georgiou. According to him "Financials are not only well positioned to capture the benefits of the above-mentioned Trump tailwinds, but are also less impacted / would even benefit from the Trump headwinds."
Bank of America's global economics team recently summarized the sentiment, stating, "Pro-growth policies like deregulation of financial services and energy, as well as lower taxes, are boosting market sentiment and asset prices."
According to Goldman Sachs analyst Richard Ramsden, large-cap banks remain optimistic about the economy. "Healthy consumer spending trends and strong corporate balance sheets have supported a constructive outlook," Ramsden said in a recent note.
The top-performing financial stocks of 2024 include Robinhood Markets, Interactive Brokers Group, Coinbase Global, KKR & Co, and Wells Fargo.
| Company | YTD Performance |
| Robinhood Markets Inc. (NASDAQ:HOOD) | 236.54% |
| Interactive Brokers Group Inc. (NASDAQ:IBKR) | 111.59% |
| Coinbase Global Inc. (NASDAQ:COIN) | 98.65% |
| KKR & Co Inc. (NYSE:KKR) | 85.99% |
| Wells Fargo & Co. (NYSE:WFC) | 43.54% |
| Blackstone Inc. (NYSE:BX) | 42.75% |
| M&T Bank Corp. (NYSE:MTB) | 41.08% |
| JPMorgan Chase & Co. (NYSE:JPM) | 38.52% |
| Morgan Stanley (NYSE:MS) | 36.04% |
| Citigroup Inc. (NYSE:C) | 34.09% |
| Bank of America Corp. (NYSE:BAC) | 32.89% |
| Fifth Third Bancorp (NASDAQ:FITB) | 29.53% |
| PNC Financial Services Group Inc. (NYSE:PNC) | 26.71% |
| Arthur J. Gallagher & Co. (NYSE:AJG) | 25.74% |
| HSBC Holdings Plc. (NYSE:HSBC) | 21.24% |
| Prudential Financial Inc. (NYSE:PRU) | 13.69% |
| American International Group Inc. (NYSE:AIG) | 3.46% |
The iShares U.S. Financial ETF (NYSE:IYF) has risen 31.35% year-to-date.
Similarly, other financial-focused ETFs have seen strong gains. The Financial Select Sector SPDR Fund (NYSE:XLF) surged 30.3%, while the Vanguard Financials Index Fund ETF (NYSE:VFH) climbed 30.89%.
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