Financials: More Resilient Than Feared

Financial companies should remain resilient over the next several years as higher nominal growth, private-market expansion and self-directed investing offset pressure from rates and artificial intelligence.

• Deglobalization, onshoring, AI-related data-center capital expenditure and persistently high fiscal deficits are expected to support a higher-growth, higher-rate environment for at least the next couple of years.
• Regional banks and commercial real estate brokers may benefit from stronger economic growth and business models supported by balance-sheet intensity, regulation and physical assets, while banks with concentrated customers or industries remain unattractive.
• Private-market vehicles avoided widespread fire sales during elevated redemption requests, and flagship funds raised by strong managers are running 15% to 20% or more above predecessor funds.
• The number of U.S. public companies fell from 8,090 to 3,908, supporting the case for continued private-market growth, while gradual retail inflows and healthy institutional flows could support alternative asset manager stocks.
• Only 56% of adults participated directly or indirectly in the stock market according to the Fed's 2025 Survey of Consumer Finances, leaving room for self-directed platforms as younger investors receive transferred wealth.

Takeaway: Investors should favor high-quality, balance-sheet-light financial businesses with durable moats, remain selective on regional banks and alternative managers, and treat stablecoins, perpetual futures and many tokenized products cautiously while giving prediction markets the strongest outlook among newer products.