Investor expectations for the Federal Reserve to embark on a new era of monetary tightening as early as this month could lift bank stocks to new highs, according to RBC Capital Markets, which reiterated a buy rating on the sector.
Since the U.S. presidential election on Nov. 8, the financial sector has rallied 24 percent compared with a gain of 11 percent for the S&P 500 index as investors anticipate a favorable business environment for the group under President Donald Trump.
"Over the past several years, Financials have experienced numerous headwinds including lower rates, legacy litigation expenses, rising regulatory burdens, and falling levels of capital markets activity. However, each of these appears to be easing," wrote Jonathan Golub, RBC's chief equity strategist.
In a research note distributed to clients Monday, Golub reiterated his overweight rating on financials, which was originally issued in November 2016.