The dramatic underperformance of US Financials stands out, especially as we see the US economic trough and focus on when and how to invest in a recovery. We see the US Financials as a value trap, however, poorly positioned on our allocation framework, and with unique bond yield and regulatory capital headwinds that help make other sectors better ways to play the recovery outlook.
US Financials still poorly positioned
US Financials have lagged the S&P 500 index over 20pp YTD, with the banks' sub-index underperforming by 30pp. Only select broker-dealers and exchanges have been more