Shares sector review – financial services

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Tax, investments and pension rules can change over time so the information below may not be current. This article was correct at the time of publishing, however, it may no longer reflect our views on this topic.

Has the financial services sector outperformed the stock market in 2023? We look at the latest results, what’s in store for the rest of the year and the opportunities to look out for.

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

25 September 2023

The financial services sector is made up of banks, insurance, and asset management companies. It’s a cyclical sector, which means business performance is closely tied to the financial health of consumers and the broader economy.

The cyclical nature of the sector means it’s perhaps no surprise that over five years, UK financials have underperformed versus the wider market – it returned 11.6% compared to 21.8% for the market.

It’s not too hard to pinpoint exactly where that underperformance has come from. The pandemic sent shockwaves around the world and financials were hit hard.

Not only was there increased recession risk and a major halt in economic activity, but interest rates were at rock bottom