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The Liontown Resources Limited (ASX: LTR) share price has continued its poor run on Tuesday.

In afternoon trade, the lithium developer’s shares are down 2% to $1.23.

This means the Liontown share price is now down 27% in the space of just a month.

What’s going on with the Liontown share price?

Investors have been selling down the Liontown share price over the last few weeks amid broad weakness in the lithium industry.

It isn’t just Liontown which has seen its shares take a tumble. Over the same period, the Allkem Ltd (ASX: AKE) share price has fallen 17%, the Pilbara Minerals Ltd (ASX: PLS) share price has dropped 19%, and the Lake Resources N.L. (ASX: LKE) share price has crashed 30%.

Given how high up the risk curve that lithium shares are, they have felt the brunt of investor selling during the market meltdown. Though, it is worth highlighting that all four of these lithium shares are still thumping the market with strong gains on a 12-month basis.

In fact, the Allkem share price is the relative laggard in the group with a gain of only 50% over the last 12 months.

Where next for the Liontown’s shares?

According to a note out of Macquarie from last week, its analysts see a lot of value in the Liontown share price at the current level.

The broker currently has an outperform rating and $2.50 price target on its shares. This suggests that the company’s shares could double in value over the next 12 months.

Macquarie is positive on lithium and particularly Liontown due to its offtake agreements with LG and Tesla. It also highlights that the company has funding in place to cover it until stage one production in FY 2025.

The post The Liontown share price has plunged 27% in a month: Where next for this lithium share? appeared first on The Motley Fool Australia.

More reading

• Why A2 Milk, Imugene, Liontown, and Magellan shares are tumbling lower
• Here are the 3 most heavily traded ASX 200 shares on Monday
• Low charge: Is the party over for ASX lithium stocks?
• Which ASX 200 mining shares were the worst-performing on Friday?
• Why is the Novonix share price down 6% on Friday?

Motley Fool contributor James Mickleboro has positions in Allkem Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Betashares Australian Equities Strong Bear Hedge Fund (ASX: BBOZ) has had a great month.

On 11 April, shares in BBOZ closed at $3.81. At the time of writing, the Bear Hedge Fund is trading for $4.38, up 15% in a month.

With so many stocks heading the other way these past four weeks, why is the ASX-listed BBOZ putting in such a good show?

Why BBOZ is making hay this past month

BBOZ is trouncing the market today precisely because that’s what the hedge fund is designed to do in times of ASX selloffs.

According to Betashares’ website:

BBOZ seeks to generate magnified returns that are negatively correlated to the returns of the Australian share market. The Fund expects to generate a magnified positive return when the S&P/ASX 200 Accumulation Index falls (and a magnified negative return when the index rises).

BBOZ is designed to gain 2% to 2.75% for every 1% decline in the ASX 200 on any given day. When the ASX rises, the Bear Fund will lose value.

Which gives us some good insight into why the fund has been doing so well.

Since this time last month, the S&P/ASX 200 Index (ASX: XJO) is down 6.2%, having dropped another 1.56% in intraday trading today. Which puts the 15% monthly gain for BBOZ right in line with the 2% to 2.75% negative correlation Betashares aims for.

Why has the ASX 200 come under pressure?

After a strong year of gains in 2021, a year that saw BBOZ fall 32.8%, the ASX 200 has come under pressure in 2022 on several fronts.

First, Russia’s invasion of Ukraine is roiling geopolitical tensions and sending energy prices rocketing.

Second, investor concerns also include China’s COVID-zero policies seeing the country initiate lengthy, intensive lockdowns that could dim the economic growth outlook for the world’s second-largest economy.

And then there’s the fast-rising inflation in the developed world and resulting interest rate hikes on the horizon.

While those factors have dragged on the overall performance of ASX shares, Betashares BBOZ has marched higher.

The post Why has the Betashares Australian Strong Bear Fund (BBOZ) leapt 15% in a month? appeared first on The Motley Fool Australia.

More reading

• Fortescue share price dives another 3%, down 12% in a week
• Is the Coles share price an inflation hedge?
• Why Amazon shares are tumbling today
• Why did the BrainChip share price just crash 17%?
• Pendal share price surges as profit soars 60%

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Fortescue Metals Group Ltd (ASX: FMG) share price is in the red for a second consecutive day, adding to its recent downturn.

Today’s move comes after iron ore futures slumped another 4.7% overnight, reaching US$133.99 a tonne, according to CommSec.

At the time of writing, the Fortescue share price is $18.99, 3.26% lower than its previous close.

Earlier today the iron ore giant’s stock reached an intraday low of $18.45, representing a 6% tumble.

For context, the S&P/ASX 200 Index (ASX: XJO) is currently down 1.45%. Its slip follows another disastrous session on US markets.

Fortescue share price slips again on Tuesday

The Fortescue share price is continuing to suffer on Tuesday, bringing its losses for the last seven days to 11.7%.

Its fall follows that of the price of iron ore. Prior to Monday’s open, iron ore futures dropped 4.7% to US$138.44 per tonne.

The commodity’s fall might be due to concerns continued COVID-19 lockdowns in China could impact global demand for steel.

China is the world’s largest importer of iron ore and lockdowns in the nation have previously cast doubt over the commodity’s value.

Restrictions on movement in Shanghai have been tightened once more despite case numbers falling, ABC News reported on Tuesday.

Fortescue CEO Elizabeth Gaines told the Australian Financial Review last month that lockdowns in China hadn’t negatively impacted demand for iron ore.

The Fortescue share price isn’t the only ASX iron ore giant to be trading lower today. Those of BHP Group Ltd (ASX: BHP) and Rio Tinto Limited (ASX: RIO) are down 2.47% and 3.85% respectively.

Meanwhile, the S&P/ASX 200 Resources Index (ASX: XJR) is recording a 2.82% dip.

The post Fortescue share price dives another 3%, down 12% in a week appeared first on The Motley Fool Australia.

More reading

• Could Fortescue Future Industries’ green hydrogen help Europe ditch Russian energy?
• Why is the Fortescue share price sinking 6% on Monday?
• Which ASX 200 mining shares were the worst-performing on Friday?
• The Fortescue share price is down 8% in May. Is now the time to buy?
• ASX 200 mining shares slump, dragging index into the red

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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There has been a lot of volatility since the start of 2022. Many ASX shares have seen declines. However, the Coles Group Ltd (ASX: COL) share price has been rising. Does this mean it’s a hedge against inflation?

Since the beginning of the 2022 calendar year, at the time of writing, the Coles share price has risen by around 3%. That compares well against the S&P/ASX 200 Index (ASX: XJO) which has fallen by more than 7%.

There is a lot of investor attention on inflation and potential interest rate rises.

What’s going on with the Coles share price and inflation?

There are some businesses that are able to pass on inflation costs to customers, leading to organic revenue growth.

If Coles were to earn the same profit margins, then higher inflation/revenue can help grow the net profit after tax (NPAT).

In the recent FY22 third-quarter update from Coles, the supermarket business said inflation steadily increased throughout the third quarter, with total supermarkets price inflation of 3.3% compared to deflation of 0.2% in the sector quarter.

Coles said that of the supplier input cost inflation requests received, the primary rivers were “raw material, commodity, shipping and fuel costs”. Meat inflation was “largely a result of elevated livestock prices”. There was inflation in vegetables such as cucumbers, broccoli, and tomatoes, with floods in Queensland and NSW impacting availability.

The ASX share also said that supplier input cost inflation is expected to continue in the fourth quarter and into FY23.

Third-quarter recap

Coles reported that, for the quarter, its supermarket sales increased by 4.2% to $8.23 billion. Liquor sales increased by 2.8% to $784 million and Express sales fell by 2.1% to $285 million.

The company said that a high number of COVID-19 Omicron cases in January resulted in increased “absenteeism” with a large number of Coles and supplier team members required to isolate. This led to availability challenges and short-term impacts to stores and distribution centres.

COVID-19 impacts on shopping habits are also dissipating. Coles said that “local shopping trends re-emerged with the contribution from neighbourhood stores greater, as compared to shopping centres and CBD stores”.

Is the Coles share price a buy?

Morgans rates Coles as a buy, with a price target of $20.65, implying a potential rise of more than 11% over the next year on the current price of $18.49.

The broker also noted the comments made by Coles about trading in the fourth quarter. Coles said:

In the fourth quarter to date, Coles has recorded a solid trading period with no COVID-19 related restrictions on traditional family events such as Easter … pleasingly availability continues to improve as the supply chain recovers. COVID-19 costs are expected to continue to moderate further, particularly as public health requirements are eased.

Another broker that rates Coles as a buy is Citi, with a price target of $19.30. It thinks the supermarket business will benefit as consumer habits and the supply chain normalise.

According to Citi, the Coles share price is valued at 22x FY23’s estimated earnings with a projected FY23 grossed-up dividend yield of 5.5%.

The post Is the Coles share price an inflation hedge? appeared first on The Motley Fool Australia.

More reading

• Analysts name 2 ASX dividend shares to buy with growing yields
• Which ASX supermarket shares could win (and lose) as higher inflation hits shelves?
• Why BrainChip, Coles, Fisher & Paykel Healthcare, and PolyNovo shares are rising
• Guess which ASX 200 shares are defying today’s sell-off to climb higher
• Could these 3 ASX dividend shares still beat the piggybank if rates hit 2.5%?

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended COLESGROUP DEF SET. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

What happened

Shares of Amazon.com (NASDAQ: AMZN) continued to fall on Monday as fears of a consumer retreat grew. The e-commerce giant’s stock was down 3.2% at 12:03 p.m. ET, and was down 10% overall for the month to date.

The Federal Reserve hiked interest its benchmark interest rate by 0.5 percentage points last week, and it’s expected to do so again following its next two monthly meetings in June and July as it attempts to tame inflation. 

So what

Rampant inflation is battering consumers, and when coupled with the prospects for economic decline, sales growth is likely going to slow further. But getting inflation under control won’t be easy or pleasant and many pundits fear it could cause the economy to contract.

U.S. gross domestic product was already down 1.4% in the first quarter. The Federal Open Market Committee has said that it plans to boost the federal funds rate to around 1.9% by the end of 2022. But St. Louis Fed President James Bullard has said publicly that he thinks a steeper path of hikes to 3.5% by the end of the year will be needed to get inflation under control.

Now what

As the biggest e-commerce site in the U.S., accounting for 40% of all online sales, Amazon is always apt to feel some pain when consumers tighten their belts. Yet it is still growing: U.S. revenue was up 7.5% in the first quarter.

While retail obviously remains important to the company, Amazon’s cloud computing operations are its biggest profit center. Earnings were up 57% in that segment last quarter. Look for that trend to continue as more businesses move more of their own operations online. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Why Amazon shares are tumbling today appeared first on The Motley Fool Australia.

More reading

• Is global e-commerce really at risk?
• Why Amazon stock tanked today
• What Apple and Amazon said after hours Thursday
• Have ASX tech shares finally reached the bottom?
• The world’s most valuable companies from 2000 to 2022

Rich Duprey has no position in any of the stocks mentioned. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Amazon. The Motley Fool Australia has recommended Amazon. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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ASX shares are having yet another doozy of a selling day thus far this Tuesday. As it currently stands, the All Ordinaries Index (ASX: XAO) has lost another painful 1.36% and is now back to just under 7,260 points. But that pales in comparison to what is happening with the BrainChip Holdings Ltd (ASX: BRN) share price.

BrainChip shares are getting hammered today, no way around it. At the time of writing, this artificial intelligence company is down a nasty 11.16% at $1.075 a share. It could be worse though. Soon after market open, BrainChip shares plunged all the way down to $1 a share. That was a loss worth more than 17% at the time.

Even though the company has recovered some of this morning’s losses, its current pricing still puts BrainChip among the worst-performing ASX shares of the day.

So what’s going on with BrainChip today that has elicited such a strong punishment from the markets?

Why is the BrainChip share price tanking today?

Well, as we covered yesterday, BrainChip was one of the few ASX shares that had a strong day of trading on Monday. As most ASX shares were crashing, BrainChip ended up racing higher, finishing at $1.21 a share. That was up around 14% for the day.

As we covered at the time, this rise might have had something to do with BrainChip listing the leading UK-based semiconductor company Arm as a partner. It seems this was enough to attract buyers yesterday.

But judging by the company’s share price performance over today thus far, this goodwill seems to have burned out. There hasn’t been any other news or announcements out of BrainChip this week, so that’s the best explanation we have right now.

At the current BrainChip share price, this ASX tech share has a market capitalisation of $2.07 billion.

The post Why did the BrainChip share price just crash 17%? appeared first on The Motley Fool Australia.

More reading

• 3 ASX All Ordinaries shares that managed to post decent gains on Monday
• Why BrainChip, PolyNovo, TPG, and Westpac shares are pushing higher
• Why is the BrainChip share price racing 8% higher today?
• On a dire day for the ASX, the BrainChip share price just leapt 11%. What’s going on?
• Why BrainChip, Coles, Fisher & Paykel Healthcare, and PolyNovo shares are rising

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Block, Inc. The Motley Fool Australia has positions in and has recommended Block, Inc. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Pendal Group Ltd (ASX: PDL) share price is bucking today’s sell-off with its shares rallying on the back of a profit surge.

Shares in the fund manager jumped 6.69% to $5.26 in late morning trade. The gain is even more impressive given that the S&P/ASX 200 Index (ASX: XJO) tumbled 2.2% to a near three-month low as investors dumped risk assets.

All sectors are trading in the red at the time of writing. But the Pendal share price was spared the carnage after it said its 1HFY22 underlying profit after tax [UPAT] increased by 59% over the same time last year to $131.4 million.

Pendal share price surges on profit growth

The group’s underlying earnings per share (EPS) expanded 34% to 34.3 cents and fee revenue improved 31% to $362.6 million.

The strong result was bolstered by the full six-month contribution from US investment management firm Thompson, Siegel & Walmsley (TSW). Pendal acquired the company in 2HFY21.

“We have seen TSW’s value strategies outperform in the past quarter and despite cautious US investor sentiment, TSW’s international strategies have seen inflows,” said chief executive Nick Good.

“The integration of TSW is tracking well… Execution of a coordinated sales strategy has begun, with cross-selling opportunities emerging.”

Expanding margins

Even if TSW was excluded, the group’s base management fee margins were slightly higher. Fee margins increased to 51 basis points (bps) compared to 49 bps in 1HFY21. This is due to the positive shift in Pendal’s revenue mix during the period.

Cost management also helped. Operating expenses may have increased by 20% to $209.6 million, but that’s still below revenue growth.

Most of the increase in expenses was also due to TSW. Otherwise, Pendal’s operating expenses would have risen by a more modest 4%.

Dividend and capital management

If that wasn’t enough to win over investors to the Pendal share price, the group upped its interim dividend by 24% to 21 cents per share. The dividend is on top of the $100 million on-market share buyback that management is currently undertaking.

Speaking on the result, Good added:

Pendal Group has delivered a solid first-half result in a tough environment for asset managers. We delivered healthy growth in revenue, underlying EPS, UPAT, and the interim dividend.

While continuing to invest in our business, we have taken a more disciplined approach during the period, in response to the current market environment and tempered investor confidence.

Lack of guidance isn’t hurting Pendal’s share price

However, if you were hoping for a more substantive outlook and guidance, Pendal will leave you wanting. Good didn’t say much except for a couple of motherhood comments about continuing to manage costs and delivering “investment excellence”.

On the other hand, given how volatile the environment is, you can’t blame management teams for being vague.

Even with today’s big rally, the Pendal share price is still nursing a close to 30% loss over the past year.

The post Pendal share price surges as profit soars 60% appeared first on The Motley Fool Australia.

More reading

• ASX shares are tumbling, but is it an actual stock market crash?
• 5 things to watch on the ASX 200 on Tuesday
• Here are the top 10 ASX shares today
• ‘Do not panic’: Experts explain how to stay calm and carry on investing amid rising interest rates
• Here are the 3 most heavily traded ASX 200 shares on Monday

Motley Fool contributor Brendon Lau has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Core Lithium Ltd (ASX: CXO) share price is in the red today despite some promising drilling results.

The ASX lithium explorers shares are currently swapping hands at $1.12, a 2.2% fall. However, in earlier trade, the company’s share price plunged almost 11% to $1.02. For perspective, the  S&P/ASX 200 Index (ASX: XJO) is falling 2% today.

Meanwhile, Core Lithium is not the only ASX lithium share to descend today. The Lake Resources NL (ASX: LKE) share price is falling 4.8%, while Pilbara Minerals Ltd (ASX: PLS) is down 2.34%.

The S&P/ASX 200 Materials Index (ASX: XMJ) is sliding 2.7% in today’s trade, while the S&P/ASX 300 Metals and Mining Index (ASX: XMM) is gravitating 3%.

Let’s take a look at what could be impacting Core Lithium today.

What did Core Lithium announce?

The company has received final results from lithium exploration in 2021 at the Finniss Lithium Project in the Northern Territory.

Core reported “exciting results” from the Penfolds prospect. A highlight for the company was a high-grade intersect of 11m at 1.55% lithium oxide from 131m at drill hole SRC080. This included a zone of 7m at 2.06% lithium oxide.

Drilling also intersected spodumene-bearing pegmatite beyond the current mineral resource estimate at the BP33, Lees and Hang Gong prospects.

Further drilling at the Finniss project will continue in the coming month.

Management commentary

Core Lithium’s managing director Stephen Biggins said:

The highly prospective nature of these new lithium drilling results reflect the confidence Core has in delivering further significant resource growth from the Finniss Project that will add to our life of mine and our capacity to materially increase lithium production from northern Australia in the future to keep up with rapidly growing global demand.

Our prime directive is to deliver first production of high-quality lithium concentrate from the Finniss Project this year in the midst of a very high lithium price and high operating margin environment.

Core Lithium share price snapshot

The Core Lithium share price has exploded 375% over the past 12 months, while it has soared 93% in the year to date.

For perspective, the benchmark ASX 200 has lost 2% over the past year.

Core Lithium has a market capitalisation of about $1.89 billion.

The post Core Lithium share price dips despite ‘exciting results’ appeared first on The Motley Fool Australia.

More reading

• Why is the Novonix share price down 6% on Friday?
• Why is the Core Lithium share price tracing 6% lower on Friday?
• Investing in ASX lithium shares? Here’s what you need to know
• Here are the top 10 ASX shares today
• 3 ASX 200 mining shares that surged more than 5% today

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The AUB Group Ltd (ASX: AUB) share price has returned to trading following the company’s institutional component update.

At the time of writing, shares in the insurance broker network are swapping hands at $18.62, down 16.73%.

AUB shares resume trading

It been a disappointing day for AUB shares, with investors selling their holdings amid the company’s successful equity raise.

In its release, AUB advised it has completed its institutional placement and institutional entitlement offer.

The accelerated pro-rata non-renounceable entitlement offer sees 1 share issued for every 5.2 AUB shares owned. Issued at a price of $19.50 apiece, both the placement and entitlement offer were significantly oversubscribed. The majority of eligible institutional security holders took up their allocated minimum entitlements on the latter.

Approximately 18 million new shares are to be issued under the equity raising, representing 24.1% of the current issued capital.

The newly created shares will be settled on 17 May, and available to trade on the following day.

With the institutional entitlement offer and placement now completed, the retail component will commence on 16 May.

Hoping to raise an additional $47 million, AUB will offer the same terms and ratio of shares to eligible retail shareholders. The Retail Entitlement Offer is expected to close on 27 May.

AUB’s total equity raising (being the placement and entitlement offer) is $350 million.

The company recently entered into a binding agreement with Tysers for a total consideration of around $880 million.

The acquisition will be funded from proceeds of the equity raising, a placement of $176 million (GBP100 million) of AUB shares to the vendor of Tysers, and a new $675 million multi-currency debt facility.

AUB group CEO, Mike Emmett commented:

We are very pleased with the strong support we have received from our institutional shareholders and welcome new investors to AUB as we undertake this important next step in our growth strategy.

Tysers will provide AUB with a direct platform to the Lloyd’s market, assisting AUB to continue our growth while enhancing our value proposition to our brokers and customers.

About the AUB share price

Trading along small and sharp share price movements, AUB shares have fallen by about 6% in the last 12 months. However, in 2022, the company’s share price is down by 25%.

AUB presides a market capitalisation of roughly $1.43 billion, with approximately 74.46 million shares on its books.

The post Here’s why the AUB share price is tumbling 16% today appeared first on The Motley Fool Australia.

More reading

• AUB share price halted amid $880 million acquisition

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Austbrokers Holdings Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Commonwealth Bank of Australia (ASX: CBA) may not be delivering the best returns of the S&P/ASX 200 Index (ASX: XJO) banks in 2022, but it’s certainly outpacing the benchmark index itself.

The CBA share price is following the bulk of the market lower today, down 1.6% to $101 per share in late morning trade. This comes on the back of another day of heavy selling in US markets yesterday (overnight Aussie time), with the S&P 500 closing down 3.2%.

Today’s selling also sees the CBA share price dip into the red for the calendar year, down 1.1%.

While that’s not the result investors would like to see, it’s well ahead of the 8.3% year-to-date loss posted by the ASX 200. And let’s not forget that CommBank also paid out a $1.75 fully franked interim dividend on 30 March.

So why is the big bank outpacing the index?

Rising rates offering tailwinds to financial shares

One of the biggest factors dragging on ASX shares is the realisation that inflation around the Western world is above central banks’ target zones, ushering in a long dormant scenario of rising interest rates.

Higher rates increase the costs of tomorrow’s money. And the spectre of a series of rate hikes has hit high growth tech share the hardest. The S&P/ASX All Technology Index (ASX: XTX), for example, is down 33% in 2022.

But the CBA share price has weathered the storm a lot better, alongside most financials. While still down for the year, the S&P/ASX 200 Financials (ASX: XFJ) has only lost 2.7%.

Part of that resilience is that financial shares are among the few sectors that can benefit from higher interest rates.

“Banks and financials tend to perform well in rate hike cycles, this is because higher interest rates are generally beneficial to banks since they allow them to earn more net interest income,” said eToro market analyst Josh Gilbert.

EY’s banking and capital markets leader, Tim Dring also pointed to higher rates offering a lift to the CBA share price and other bank shares:

While margin compression is likely to continue in the short term, the rising interest rate cycle should ease NIM [net interest margin] pressures and lead to improved profitability for the banks over the medium term.

But it’s not all smooth sailing ahead for the banks. “Ongoing economic risks point to continued uncertainty for the banking sector’s outlook,” Dring added.

And while higher rates do increase the banks’ lending margins, they could also result in an increase in bad debts and slower loan growth moving forward.

CBA share price snapshot

Though it’s just dipped into the red for 2022, the CBA share price remains up 6.2% over the past 12 months. That compares to a 2.9% loss posted by the ASX 200 over that same period.

The post Why is the CBA share price outpacing the ASX 200 in 2022? appeared first on The Motley Fool Australia.

More reading

• What’s the outlook for ASX 200 bank shares amid rising interest rates?
• Is it too late to buy big bank ASX shares?
• Own CBA shares? Here’s what to expect when the bank reports next week
• Top brokers name 3 ASX shares to sell today
• What’s the outlook for the CBA share price in May?

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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