IYF and VFH are not immune to the February woes afflicting the financial services sector. Those ETFs have averaged negative returns in the second month of the year since debuting in 2000 and 2004, respectively, and their odds of success this month are comparable to XLF’s.
February lethargy for bank ETFs, of course, comes by of the funds’ components. Since 1990, Wells Fargo (NYSE: WFC) has lost an average of 0.4% in February. Goldman Sachs (NYSE: GS) has been twice as bad this month since 1999. Citigroup’s (NYSE: C) average February performance since 1990 is a loss of almost 2%. Those three stocks combine for almost 17% of XLF’s weight, according to State Street data.
In fairness, opportunities remain with XLF and friends. Financials are not expensive. If anything, the sector is downright cheap compared to consumer sectors. Second, financials are expected to be a leading source of S&P 500 earnings growth, just as the group was last year. Not to mention, ETFs like XLF are chock full of companies that are likely to raise their dividends this year. [Bank ETFs For Rising Dividends]
So yes, bank ETFs can bounce this year. Some adventurous traders are already betting on that as the Direxion Daily Financial Bull 3X Shares (NYSEArca: FAS) was among the leading Direxion ETFs in terms of net creations on Monday. Just be careful with the group in February.