Moreover, the financial sector received a boost from Presidential candidate Donald Trump after he proposed dismantling nearly all of Dodd-Frank, the package of financial reforms placed after the global financial crisis.
Financial entities like banks will benefit from expanding margins as rates climb. A rising rate environment may reflect a strengthening U.S. economy, and a healthier economy would help borrowers have an easier time repaying loans, with banks stuck with fewer non-performing assets. Moreover, rising rates means that banks will generate greater revenue from the spread between what they pay deposit savers and the prime rates they charge credit-worthy clients and other highly-rated debt.
“Bottom line- Broad market wants banks to break above 1-year falling resistance, if it is to breakout to new all-time highs. Keep a close eye on the BKX index over the next couple of weeks, should send an important message to traders/investors,” according to Kimble.
Financial Select Sector SPDR