KBE, which leans toward slightly larger companies, gained 4.7% so far this year. KBE includes 47.6% small-caps, 36.5%, mid-caps, 8.0% large-caps and 8.0% mega-caps. The ETF includes JPM 1.7%, BAC 1.6%, WFC 1.6%, KEY 1.6% and BBT 1.6%.
The banks could weather an interest rate hike, but investors should not expect bank stocks to outperform off higher rates.
“While higher rates may well serve as a tailwind for financials firms over the longer term, any immediate benefit from an interest-rate hike for financial-services firms would be muted at best, as higher rates will not translate one-for-one into higher earnings for banks,” according to Morningstar analyst Robert Goldsborough. “Bank earnings and valuations are driven more by net interest margins, which are more stable over time, than by rates themselves.”
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Max Chen contributed to this article.