The Fed’s eyeing 11 rate hikes, but the banks to buy are outside the U.S., these fund managers say
The Federal Reserve just made its first interest-rate hike in four years and is expecting 11 quarter-point increases this cycle. Loan origination is also rising as consumers burn through the savings accumuluated through stimulus checks and extra unemployment benefits. So it’s a great time to load up on financials, right?
The surprising answer from managers of the Franklin Mutual Financial Services Fund TFSIX is, not necessarily, at least in the U.S. What about the war raging on their doorstep? “Although the greater economic uncertainties in Europe stemming from the spike in energy prices and any exposure to Russia and Ukraine may temper the outlook in the near term, particularly if banks are forced to raise their provisions for bad debts, we expect any jolt is likely to be to bank earnings and not banks’ capital. Moreover, we view the recent selloff in banks across the region as overdone given the potential impact,” they say.
The fund managers didn’t name companies in their analysis. Their top two holdings at the end of January were American banks, Wells Fargo WFC and Citizens Financial CFG . Their European exposure included Spain’s CaixaBank CABK , France’s biggest lender, BNP Paribas BNP , U.K. bank Barclays BCS , Dutch bank and insurer ING ING , and Germany’s Deutsche Bank DB .
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