Bank ETFs Still Merit Caution

ETFs such as the Financial Select Sector SPDR (NYSEArca: XLF), iShares U.S. Financials ETF (NYSEArca: IYF) and the Vanguard Financials ETF (NYSEArca: VFH) have been under pressure following the Brexit outcome, but there are other factors at play, including the Federal Reserve’s refusal to raise interest rates to this point in 2016.

“A better step would be for the sector to improve its trend of relative performance vs. the market. As we can see in the chart above, the bank ETF outperformed the market in July but over the past year the opposite was true. Banks are still near their 52-week low in terms of relative performance,” according to Barron’s.

Related: Financial Sector ETFs Plunge on Brexit Contagion

Analysts anticipate the industry will post its fourth-straight profit decline in the second quarter after the group posted a 12% decline in profits year-over-year in the first quarter.

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Financial Select Sector SPDR