Eckhout went on to tell IBD: “Even though financials have had a solid rally this year, they are still in the early innings of their full potential performance. U.S. financials just finished the second-quarter earnings season with 79% of companies beating expectations — the highest rate among all sectors.”

Of note to investors is the long-term track record of the KBW Bank Index, KBWB’s underlying index. This year and over the past year, the index has outpaced the S&P 500 Financial Services Index by about 150 basis points. Over the past five years, KBWB’s index has offered more than double the returns of the S&P 500 Financial Services Index.

PowerShares KBW Bank Portfolio

ETF Trends editorial team contributed to this post. Tom Lydon’s clients own shares of KRE.