These ETFs and others have gotten lifts from the results of the Federal Reserve’s stress tests and the annual Comprehensive Capital Analysis and Review (CCAR) along with talk of higher interest rates. [Bank ETFs Boosted by Higher Rate Chatter]
“Higher rates could relieve bankers whose profits have been squeezed by a revenue slump and rising costs. A yield curve plots interest rates over different lengths of time, so a steeper curve creates more of a spread or profit margin for banks between what they pay for short-term deposits and the longer-term yields they can earn on lending and investments,” report Elizabeth Dexheimer and Christopher Condon for Bloomberg.
“So goes the banks, so goes the broad market? Often time this is very true. If Banks would break out here, it could help pull the broad markets higher. These leaders find themselves at important levels with momentum over bought,” said Kimble.
Since March 3, XLF is 3.3% while IBB is down 10%.
Chart Courtesy: Kimble Charting Solutions