Citigroup Inc's chief global equity strategist has joined the trend of bullish global financial stocks as the market looks for the best tools to hedge against upside risks to interest rates and inflation.
Like more and more of its peers, Robert Buckland expects value stocks to provide some protection against market volatility caused by rising bond yields.
"I'm not sure value stocks will make you money, but I think they can better withstand the damage of rising interest rates than holding technology stocks and growth stocks," Buckland said by phone. "from a real yield point of view, financial stocks should perform better and technology stocks will be hit harder."
Bank stocks have been popular recently as the yield on 10-year US Treasuries has exceeded 1.5 per cent. While higher interest rates have weighed on more expensive technology stocks, they could boost profits in the banking sector.
French Societe GeneraleBank strategists have also touted bank stocks to investors who want to increase their exposure to the value sector, as banks should benefit from higher bond yields and have limited exposure to risks such as higher energy prices and supply chain disruptions.
In Europe, banks have overtaken technology as the best performing sector so far this year, with the Stoxx 600 bank index up 32 per cent. And NASDAQThe 100 index has fallen 6.4 per cent since hitting a record high last month. If 10-year US Treasuries yield 2 per cent, global technology stocks could outperform the market by 10 to 15 per cent, according to Citi Buckland.