By Steve Goldstein
Goldman’s strategists say banks and value in general have room to catch up.
With the recent surge in bond yields, so too come analysts hopping on the value stock bandwagon.
As Goldman Sachs’ economists now think rate hikes in the U.K. will start in May 2022 — ahead of the U.S. and the eurozone — bonds yields should continue to rise. Already, the U.K. 10-year /zigman2/quotes/211347177/realtime BX:TMBMKGB-10Y +0.23% has outgained U.S. /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y +0.47% and European /zigman2/quotes/211347112/realtime BX:TMBMKDE-10Y +0.96% rivals, with an 80 basis point rise this year.
Goldman’s strategists say banks and value in general have room to catch up. Banks trade at a 35% discount to the market, as well as a discount to their own historical valuations, and it says the average upside is 52% for the U.K. banks it rates as buy: HSBC /zigman2/quotes/203901799/delayed UK:HSBA -0.68% , Barclays /zigman2/quotes/208409333/delayed UK:BARC -0.55% , NatWest /zigman2/quotes/209265718/delayed UK:NWG -0.55% and Standard Chartered /zigman2/quotes/200125072/delayed UK:STAN -1.73% .
The FTSE 100 /zigman2/quotes/210598409/delayed UK:UKX -0.17% on Friday drifted 0.6% lower to 7,044.68. Lloyds /zigman2/quotes/202285510/delayed UK:LLOY -1.07% paced the decline, with the U.K. focused bank losing 3%.
Pub chain J.D. Wetherspoon /zigman2/quotes/209658419/delayed UK:JDW -1.25% was the highest profile company reporting results, as it lost £154.7 million before tax in the July 25-ending year, before exceptional items, as like-for-like sales tumbled 38%. It said it was hard to find staff in the “staycation” areas in the West Country and elsewhere. Wetherspoon shares edged up 0.7%, to trim this year’s losses to 6%.