Polar Capital Global Financials Trust (PCFT) has been a beneficiary of renewed interest in the financials sector, as economies reopen from the effects of lockdowns and interest rates begin to edge up (as we explain in this note, higher rates should feed into higher margins for banks). Incredibly, the sector is yet to make up the ground it lost relative to the wider market in early 2020, as COVID-19 hit – see Figure 2 on page 5. Many of the companies in PCFT’s portfolio are reporting strong earnings growth already. However, the sector’s rerating has stalled on fears of a recession. PCFT’s managers point to the strength of banks’ balance sheets and their conservative lending policies. They also cite the evidence of 1970s UK – when barring brief periods of very high inflation – banks did relatively well (see page 6).