Transcript: Financial sector offers mix of growth opportunities
Emerging market banks, payment facilitators and insurance companies are among beneficiaries of positive trends, says Jennifer Martin of T. Rowe Price
- Featuring: Jennifer Martin
- May 6, 2025 May 2, 2025
- 13:01
- From: T. Rowe Price
iStockphoto/Makhnach_M
Jennifer Martin
Welcome to Soundbites, weekly insights on market trends and investment strategies, brought to you by Investment Executive and powered by Canada Life. For today’s Soundbites, we’re talking about navigating market volatility with Jennifer Martin, vice-president, global equities with T. Rowe Price. We talked about opportunities in Europe and elsewhere, and we started by asking what happened to the initial optimism over Trump’s pro-America agenda.
Jennifer Martin (JM): The Trump administration is all about extremes. When you think about it, post the election, there was a really strong market. It was up and to the right through mid-February. Positives from a business and market performance was, well, in November, a clear, definitive election result, winning across the House, the Senate, the presidency, the popular vote. Markets love certainties, and that was certainly beneficial. The deregulation efforts under the Trump administration were generally viewed positively by CEOs and business leaders — the reduction of the regulatory burden seen as a real positive for economic growth. And the other element is tax policy. Making tax cuts permanent would be favourable for the market. But then you’ve seen, really, April marked with significant volatility. I think, from Trump 1.0 we knew that he’s known for making bold and sometimes unpredictable policy statements, which creates uncertainty and this unpredictability can lead to market instability and volatility. With Trump 2.0, the range of outcomes was increasing. The one that we’re most focused on was the tariff concerns. His stance on tariffs could lead to trade barriers and cause a recession, and this uncertainty skews the market outlook a little bit more towards the downside.
The outlook for global growth
JM: We began the year cautiously optimistic. We had two very good years of global equity double-digit returns. In light of where we were in the cycle, in light of where we were with earnings, we thought that equity markets could deliver maybe upper single-digit returns. We’re still actually constructive on equities and in uncertain markets, a diversified portfolio with high-quality equities across all sectors and regions remains one of the best ways to preserve wealth. Because these are real businesses. They’re still better than most of the alternatives. We can clearly go up from here, but we obviously need to see how those cards play out.
Opportunities around the globe.
JM: I know the end of U.S. exceptionalism has been in the news cycle, and maybe we should reframe it as everyone was crowded into the same market. As a global equity manager, this shift could be seen as a positive development because it encourages a more diversified set of quality assets around the world, rather than just concentrating in a few heavily owned U.S. companies. It’s notable that the growth rate for government spending in the U.S. is decelerating, while it is increasing in Europe. The chaos of the Trump administration has woken Europe out of their slumber, and the range of outcomes are expanding in Europe, which makes that region more interesting.
Attractive sectors
JM: One of our overweight sectors is financials. There is a mix of growth opportunities in emerging market banks. And that is directly tied to the growing middle class in Vietnam, in Indonesia, in the Philippines, in India. And these are economies that are all growing faster than the developed world, and that directly benefits those banks. The next area would be payments — not just a MasterCard, but an Adyen, a blockchain – these are parts of the financial sector that focus on payment processing and technology. And it benefits from the longer-term trend of the digitization of money. The other area that we have exposure to is developed world banks in Europe, Japan and the U.S. Some of it benefits from deregulation. Some of it benefits — like in Europe — rates are going up. That will benefit net interest margins. We also have exposure to insurance companies because rising interest rates benefit the balance sheet, so they can invest those premiums at higher yields. And then, finally, we have alternative managers and capital markets names like a Charles Schwab or London Stock Exchange. They’re kind of independent of credit cycles and so forth, but benefit from volume transactions, where we do prefer private credit over private equity, and that’s largely due to the higher interest rate. So that’s where we see opportunity.
And finally, what’s the bottom line on navigating market volatility in the current moment?
JM: As active managers, we always find alpha in change, and so taking advantage of market volatility can really be additive to investors. We always encourage investors to focus a little bit more on that intermediate to multi-year term, rather than short-term market fluctuations, and stay fully invested to allow investment decisions to compound over time so that you can have those good outcomes.
Well, those are today’s Soundbites, brought to you by Investment Executive and powered by Canada Life. Our thanks again to Jennifer Martin of T. Rowe Price. Visit us at investmentexecutive.com, where you can sign up for our a.m. newsletter and never miss another Soundbite. Thanks for listening.
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