That lineup explains why KBE has lagged XLF so severely this year. Regional banks have been hurt by declining Treasury yields, but those lower yields have been a boon for REITs and REIT ETFs. [Bank ETFs Wait on Higher Interest Rates]
As Kahn notes, the divergence between the two ETF is not necessarily bad news, but KBE’s startling lag relative to XLF is concerning.
“If we define a bull market on its simplest level as a series of higher highs and higher lows then the bank ETF is clearly not in one. Its long term chart shows a flat pattern, with not only the failure to make a new high this month but also a low in May below the one in set February,” according to Barron’s.
Investors have been devoted to XLF, pouring $552 million into the ETF this year while KBE has seen modest outflows.
SPDR S&P Bank ETF