© Reuters. 4 Financial Stocks to Buy on Dips

The financial sector has been making an impressive comeback on the back of increasing financial and capital market activities with the reopening of the economy and bullish market sentiment. So, we think it could be wise to invest in fundamentally sound financial stocks Capital One Financial (COF), KeyCorp (NYSE:), Ally Financial (NYSE:), and OneMain Holdings (NYSE:). They are currently trading below their 52-week highs. Read on for more details.The financial sector was one of the hardest-hit sectors last year as the near-zero interest rate environment and fewer financial transactions amid the recession diminished the revenues of financial companies significantly, particularly banks and insurers. While the interest-rate environment remains unchanged, the sector is now witnessing a solid recovery on the back of increasing financial transactions and capital market activities. Investors’ interest in the financial sector is evident in the Financial Select Sector SPDR ETF’s (XLF) 23.8% gains year-to-date versus the SPDR S&P 500 Trust ETF’s (SPY) 16.7% returns.

Adding to the positives, the Federal Reserve has hinted at raising interest rates as soon as late 2023, a year earlier than originally anticipated, which should help financial companies expand their profit margins. Furthermore, the sector is expected to grow with the ongoing digital transformation. According to The Business Research Company, the global financial services market is expected to grow at a 9.9% CAGR to $22.5 trillion in 2021.

With these factors in mind, we believe established financial companies Capital One Financial Corporation (NYSE:), KeyCorp (KEY), Ally Financial Inc. (ALLY), and OneMain Holdings, Inc. (OMF) could be solid bets now. They are currently trading below their 52-week highs, but we think have plenty of upside to deliver.

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