Investors hoped that higher rates would allow banks to capitalize on wider net interest margin – the difference between deposit rates and lending rates, but the global economic uncertainty has weighed on prospects for a quick Fed rate hike schedule.
While U.S. banks have some exposure to over-leveraged oil companies, the level of exposure to the distress energy industry is not up to the scale of the U.S. housing market that triggered the 2008 run. Previously, the Federal Reserve’s decision to hold off on an interest rate hike, ongoing economic weakness and concerns over trading revenues have weighed on the financial sector’s outlook.
“A weak financial group is the bane of the stock market. Financials are one of my four key sectors to gauge market health, along with home building, technology and retail. Now that the temporary revival of financials is over, bulls have to take a step back,” according to Barron’s.
Financial Select Sector SPDR
