UBS downgraded U.S. banks this week, partly based on the view that President Donald Trump's promised tax reform will take longer than expected to achieve.
"Recent comments by the Federal Reserve suggesting a more dovish outlook for policy rates, as well as comments by President Trump prioritising healthcare reform ahead of tax reform and infrastructure spending, imply that improvements in the sector's revenues and profitability may take longer than previously anticipated to come through," a UBS team led by strategist Philip Finch and analyst Mariana Taddeo said in a Tuesday note, released Thursday to media.
The report lowered UBS' view on U.S. banks to neutral from overweight, maintaining a preference for brokers and universal banks over regional banks.
Financial stocks have led the post-election market rally as the sector was expected to benefit the most from Trump's pro-growth policies of tax reform and deregulation. However, markets have grown less certain about the timing of tax reform after Republicans pulled a proposal to repeal and replace Obamacare.
U.S. stocks rose Thursday after Treasury Secretary Steven Mnuchin said a tax reform plan was "pretty close."
But a timeline on passage this year is still uncertain.