The weekly wrap 2: Macquarie Equities flexible

At the same time as RBS was quietly earning its reputation as leading banking sector bear, Macquarie was becoming leading bull, basing its view on "look-through cycle" earnings forecasts. Having decided last month that the rest of the market had caught up to its view, Macquarie began downgrading its ratings once more on the belief the market had actually gone too far.

On that basis, Macquarie downgraded Westpac directly from outperform to underperform.

But this week the analysts changed their minds again. In light of the most recent leg of the rally, driven by apparently improving economic fundamentals, Macquarie analysts took another look at their Westpac numbers and decided the bank did not deserve to trade at a discount to CBA, nor at the lowest PE multiple among its peers. They then upgraded directly back from underperform to outperform.

It is thus not hard to see just why the banking sector has so stridently outperformed in the last two weeks. Major institutional managers pay heed to major broking house recommendations. Citi turned last week, RBS this week, and even Macquarie has been in on the act.