03:23 PM EDT, 06/22/2023 (MT Newswires) -- In an Overview, Belski addressed:
1. Negative Sentiment Hitting Extreme Levels. With Canadian Financials significantly underperforming year to date and flows turning negative for the sector, BMO's work suggests negative sentiment is "hitting extreme levels".
2. Pessimism Evident in Earnings Expectations and Remains Key to Sentiment Shift. BMO's Belski said renewed negative sentiment toward Financials has clearly been driven by macro challenges and a softening earnings outlook. Indeed, he added, the breadth of negative revisions turned sharply negative in May, with only 23% of FY1 and FY2 estimates being positive over the last 60 days.
3. Selective Approach Remains Essential. Belski noted as BMO stated in its 2023 Sector Outlook, the sharp rise in interest rates, persistent inflation, and growth uncertainty all point to a more selective approach from a macro perspective, particularly within lending institutions.
4. Strong Relative Value and Stable and Consistent Dividend Growth. Belski said while the earnings outlook remains uncertain, given the macro challenges, BMO's valuation composite is near 1-standard deviation below historical average, suggesting much of this uncertainty and negativity is priced in. Furthermore, he added, the Financials sector has historically been a strong income sector, with yields firmly above long-term interest rates, and dividend growth that is proven to be consistent and stable.
Price: 117.34, Change: -0.18, Percent Change: -0.15