Expectations of monetary policy normalisation, a pause in capital regulation, and the continuation of the economic recovery are the necessary conditions for investors’ interest in the financial sector to continue. And you already know this: markets are driven by expectations, trying to anticipate the future with the information available.
But what about the sufficient condition? The arguments described, ceteris paribus, are compelling in supporting a favourable
short-term performance of bank shares. And this in itself is another positive factor to consider, as it adjusts their price-to-book valuation and thereby also allows for a reduction in the cost of capital.
