Banks: The Overlooked Beneficiary Of The AI Capital Cycle

Financials sector has been the second worst-performing group within the S&P 500 on a year-to-date basis, returning 2.3% versus 9.8% for the overall market.

As energy prices have remained elevated and inflationary risks have caught the attention of the Federal Reserve, markets have pivoted to pricing in a more hawkish policy rate path this year.

Markets have increasingly priced in a more hawkish Fed this year, yet the hurdle for additional rate hikes remains high.

Positive earnings momentum for banks remains firmly intact, with the industry seeing upward earnings revisions for both 2026 and 2027.

Recently, financials have largely been shunned by investors, with the conflict in the Middle East reinforcing investor concerns around economic growth, inflation, and the interest rate outlook.

The Principal Financial Group (The Principal®) is a global investment management leader offering retirement services, insurance solutions and asset management. The Principal offers businesses, individuals and institutional clients a wide range of financial products and services, including retirement, asset management and insurance through its diverse family of financial services companies.

Founded in 1879 and a member of the FORTUNE 500®, the Principal Financial Group has $519.3 billion in assets under management1 and serves some 19.7 million customers worldwide from offices in Asia, Australia, Europe, Latin America and the United States.

Principal Financial Group, Inc. is traded on the New York Stock Exchange under the ticker symbol PFG.

For more information, visit www.principal.com.

Insurance products issued by Principal National Life Insurance Co (except in NY) and Principal Life Insurance Co. Plan administrative services offered by Principal Life. Principal Funds, Inc. is distributed by Principal Funds Distributor, Inc. Securities offered through Princor Financial Services Corp., 800/247-1737, Member SIPC and/or independent broker/dealers. Principal National, Principal Life, Principal Funds Distributor, Inc. and Princor® are members of the Principal Financial Group®, Des Moines, IA 50392.

Investing involves market risk, including possible loss of principal.