There is mounting evidence that the financial services sector really is the Rodney Dangerfield of the 10 S&P 500 sectors.
Last week we noted that the Financial Select Sector SPDR Fund (NYSEArca: XLF), the largest U.S. sector ETF by assets, like so many of its big bank ETF brethren, was still not trading anywhere close to its pre-financial crisis highs. That despite stellar runs for most financial services ETFs in 2014. [10 ETFs Still Nowhere Near Pre-Crisis Highs]
We also noted the 12-month forward P/E of 12.7 on the financial services sector is the lowest among the 10 S&P 500 sectors. That is barely above the sector’s 10-year average of 11.9 and the only other sector is even close to be valued in a “no respect” fashion similar to financials is energy, according to FactSet data.
Said another way, financials are currently the cheapest sector in the S&P 500 based on 12-month forward P/E ratios and investors can grab XLF for a song compared to equivalent staples, telecom and utilities ETFs. [Financials: The Rodney Dangerfield Sector]
There is more. At the sector level, eight of the ten sectors are projected to report a year-over-year increase in earnings for the quarter, led by the Financials (24.9%), Industrials (14.2%), and Telecom Services (14.0%) sectors. The Energy sector is expected to see the lowest earnings growth rate (-7.2%), according to FactSet by way of Josh Brown at The Reformed Broker.
Since the start of the fourth quarter, XLF has handily outpaced the Energy Select Sector SPDR (NYSEArca: XLE) and the iShares U.S. Telecommunications ETF (NYSEArca: IYZ). XLF is up 5.4% since Oct. 1, barely better than the 5.2% gain posted by the S&P 500 and well behind the Industrial Select Sector SPDR (NYSEArca: XLI), an ETF that tracks a sector poised to deliver earnings growth inferior to that of XLF’s constituents.
In further confirmation that the financials are being treated as the Rodney Dangerfield sector with the market not giving the group the credit/respect it deserves, XLF ranks a middling fifth among the nine sector SPDRs since the start of Q4 trailing XLI the consumer discretionary and technology equivalents and, yes, even the Consumer Staples Select Sector SPDR (NYSEArca: XLP).
Financial Select Sector SPDR