The financial sector has seen massive changes in the past few years, especially during the pandemic. Financial companies are actively adopting digitization to modernize their commercial businesses to remain resilient amid growing competition and rising demand for simplified and quick commercial processes. Also, financial companies are investing significantly in big data analytics capabilities to serve clients better. The global financial services market is expected to reach $28.53 trillion in 2025, growing at a CAGR of 6%.
In addition, the Fed’s plans to aggressively hike rates this year should benefit financial companies. JPMorgan Chase economists now see the Federal Reserve hiking interest rates nine consecutive times until March 2023. The financial sector usually benefits from higher rates through increased profit margins. Bullish investor sentiment around the industry is evident in the Financial Select Sector SPDR ETF’s (XLF) 0.4% returns year-to-date versus the SPDR S&P 500 Trust ETF’s (SPY) 8.6% slump over this period.
