How reassuring, from Macquarie:
Banks offer one of the better medium-term risk-reward profiles in the market. Within Financials they are now our preferred overweight, providing both offensive and defensive attributes against a backdrop where interest rate risk is high and other yield-sensitive valuations extended. We move overweight Banks (ANZ, CBA, WBC), add QBE as a rate hedge and offset this via our -5% underweight in REITs:
Banks offer re-rating upside while being relatively insulated from higher interest rates. The scale of bank underperformance within interest rate sensitives offers (relative) downside protection and a springboard for upside (versus REITs they have underperformed by 40% since early 2014). A 2 PEpoint expansion for banks in combination with a 1 PE-point contraction for REITs would equate to a 20% performance differential.
