7 Hot Financial Stocks That Gained More Than 60% In 2016

The operating environment has not been favorable since the beginning of 2016, but the finance sector has finally emerged triumphant. The nation’s economic health, which the sector is largely dependent on, has improved decently as indicated by increasing real GDP numbers, declining unemployment rate, improving consumer spending and stabilizing housing market.

All these led to a most awaited interest rate hike this month. The interest rate was hiked to 0.50%–0.75% from 0.25%–0.50% raised in Dec 2015.

In a press conference, following the decision, Federal Reserve Chairwoman Janet Yellen said: “My colleagues and I are recognizing the considerable progress the economy has made toward our dual objectives of maximum employment and price stability … We expect the economy will continue to perform well, with the job market strengthening further and inflation rising to 2 percent over the next couple of years.”

Except REITs, the other Finance sector constituents – banks, brokerage firms, asset managers and insurers – typically benefit from a rising rate environment.

Also, the finance companies’ performance in the third quarter was decent, despite a challenging operating environment. The companies were able to maintain bottom-line growth with improved loans and deposits, and efficient cost-control measures. Further, trading volumes improved, while mortgage lending showed strength.

In addition, financial stocks have witnessed a post-election rally. Riding on higher rates and improved lending margins, along with the expectation of lesser regulations under a Donald Trump administration, the finance sector has gained 8.1% since the election. Trump's proposed infrastructure spending plans, tax cuts and reduced regulations are likely to spur economic activity.

Though the ongoing structural changes are expected to continue, with investments in emerging technologies, initial market reactions to post election results indicate improved prospects for financial stocks in 2017.

We have picked seven stocks that not only outperformed the market, but also possess solid growth prospects.

Selecting the Winning Stocks

We have taken the help of the Zacks Stock Screener to shortlist financial stocks with a Zacks Rank #1 (Strong Buy) or #2 (Buy) and 60% or more positive share price movement.

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