Financial stocks have been making an impressive comeback this year thanks to the fast-paced economic recovery and with it increasing financial transactions. Furthermore, the sooner-than-expected interest rate hikes anticipated by the Fed is also expected to be a boon for the finance industry. So, we think that investing now in American Express (AXP), Flushing Financial (NASDAQ:FFIC), and Enterprise Bancorp (EBTC) could pay off handsomely considering their fundamental strength. All three stocks have recently been upgraded by our proprietary POWR Ratings to ‘Buy.’ So, please read on for details.The shares of financial companies slumped last year with reduced financial transactions amid an economic slowdown and ultra-low interest rates. While benchmark interest rates remain at the same low level, the sector has been witnessing a solid recovery this year on the back of rebounding economic activities and increasing financial transactions.
Adding to the positives, the Federal Reserve has signaled two interest rate hikes as soon as late 2023, a year earlier than anticipated, which should bode well for the financial sector. The sector is further expected to grow with the ongoing global, digital transformation and investment in big data analytics. According to The Business Research Company, the global financial services market is expected to grow at a 6% CAGR from 2020 - 2025.
Investors’ interest in the financial sector is evident in the Financial Select Sector SPDR ETF’s (XLF) 26% gains over the past six months compared to the SPDR S&P 500 ETF Trust’s (SPY) 14.9% returns. Keeping these factors in mind, we think it could be wise to bet now on fundamentally sound financial stocks American Express Company (NYSE:AXP), Flushing Financial Corporation (FFIC), and Enterprise Bancorp, Inc. (EBTC). All three names have recently been upgraded to Buy in our proprietary POWR Ratings system.