Fisher Investments on Financials 
 
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Characteristics of financial industry:
 
1. A relatively volatile sectors that is highly correlated with broader markets 
high beta that is second only to IT industry 
 
2. Sensitive to interest rates 
– financial firms are heavily exposed to financial assets and they are typically leveraged 
– highly negatively correlated with 10 year yield except certain periods like financial crisis 
– tend to underperform in rising interest rates 
 
3. Neither cyclical nor defensive
– relative performance in both bull and bear market tend to be similar 
– best not to allow market cycle to dictate financial stocks unless it’s a financial crisis   
 
4. Heavily regulated 
– decisions made by regulators can greatly impact the sector
 
5. Highly leveraged and reliant on other people’s money 
– have a lot of liabilities relative to equity (gearing)… Asset to equity …