U.S. financials stocks have done extremely well since the financial crisis more than ten years ago, with any investor following the likes of iconic legendary investor Warren Buffet into any of the largest U.S. banks making a killing over this stretch.
Financials is a sector which has regained much of its former glory, with many of the largest U.S. banks now trading near pre-recession highs.
I continue to like U.S. bank stocks over Canadian banks for a variety of reasons (which I’ll get into shortly), and Morgan Stanley (NYSE:MS) is one of the better options in this space investors can consider.
This bank has a strong retail presence, however, the majority of Morgan Stanley’s growth potential comes from its wealth management business.
Like the other major banks in its stratum, Morgan Stanley is perhaps one of the best ways to gain exposure to U.S. domestic growth and wealth creation.
Now, for my thesis on U.S. banks outperforming Canadian banks over the next 10 years. First, the yield curves of the U.S. and Canada are vastly different, and any investor worth his salt knows that the U.S. market is much more favourable to lenders on interest rate spreads alone (a huge factor/driver of profitability in this sector).
Second, the risks to the Canadian housing market, and stock market as well, are much more pronounced than in the U.S., particularly due to consumer and corporate debt levels which are absolutely astronomical in Canada.
Most Canadians were able to borrow their way out of the financial crisis which impacted the U.S. much more so than Canada.
For Canadians looking at U.S. banks, I’d recommend diving into Morgan Stanley.
Invest wisely, my friends.
