“With the recent spate of economic data pointing to prolonged weakness in an already tepid recovery, positive catalysts for the banks sector appear distant,” Sterne Agee analysts said in a recent report. “The headwinds continue to mount for the group as housing values remain under pressure, demand for credit remains weak, and the growth outlook for the sector is subdued at this point.” [Financial ETFs Down]
Financial stocks have hurt the U.S. large-cap category because the poor-performing sector has represented a large slice of the S&P 500 at between 15% and 20% over the past decade.
“The S&P 500 has all the too-big-to-fail banks in its basket,” Colas remarked. “The small and mid cap indices have none, even if other parts of those baskets face their own problems. If the financial sector remains under pressure, small and mid cap indices look to have better constituents in the financial sector. But if you want to play the contrarian, the S&P 500 seems the best choice.”
Bank of America and Citigroup shares are down nearly 20% year to date. [Investors Look for Bounce in Bank ETFs]
PowerShares S&P SmallCap Financials
