On Monday, U.S. financials soared 17.7 per cent, continuing their leadership role as the stock market bounces back toward some semblance of its former self. This begs the question: If we are at the start of a recovery in the stock market, do financials have to continue to lead?
Ed Yardeni, chief investment strategist at Yardeni Research, doesn't think so. He said that if the Financial Accounting Standards Board relaxes mark-to-market accounting on April 2, which could boost the value of depressed assets sitting on bank balance sheets, then financial stocks could outperform for a few more weeks.
“However, I think we are likely to see a leadership shift toward the reflation trade, global cyclical sectors, and emerging economies in reaction to the extraordinarily stimulative ‘whatever it takes' thrust of U.S. monetary and fiscal policies,” he said in a note to clients.
