Notice the complete and unrelenting weakness in European financials going back to inception of the ETF, with a substantial amount of underperformance occurring in 2011, even before the summer crash expressed itself in August and September.

What I want to bring your attention to is the sharp spike that’s occurred in the ratio as 2012 started. The spike up suggests that investors in European banks have very suddenly put money back to work into the sector.

They likely would only do this if there was a high degree of confidence that the end of the world would not happen, Europe would continue to exist, and Lehman 2.0 was taken off the table. The strength remains a very bullish sign for the overall global financial system, and may be in its very early stages as market conditions conditions favor the bulls.

iShares MSCI Europe Financial Sector


The author, Pension Partners, LLC, and/or its clients may hold positions in securities mentioned in this article at time of writing. The commentary does not constitute individualized advice. The opinions herein are not personalized recommendations to buy, sell or hold securities.