Bullish Signs for Bank ETFs

Investors are probably tired of hearing about it at this point, but the financial services sector, the S&P 500’s second-largest sector weight, has been hamstrung this year by the Federal Reserve not raising interest rates.

Last month, the Fed opted to leave interest rates on hold following the conclusion of its most recent meeting Wednesday, citing concerns about Brexit, among other factors. Obviously, no interest rate hikes do not favor financial services stocks and exchange traded funds, such as the Financial Select Sector SPDR (NYSEArca: XLF).

However, some analysts are bullish on big bank stocks. One the primary catalysts that previously lured investors to bank ETFs, that being speculation of higher interest rates, is largely off the table.

SEE MORE: Financial Sector ETFs Maintain Momentum

Some technical analysts see encouraging signs on the charts of major bank indexes.

“The KBW Bank Index is attempting to break out of a one-year downtrend, and while it is still early to say banks are relative leaders, we see enough evidence to begin buying the stronger bank stocks,” said Jonathan Krinsky of MKM Partners in a post by Ben Levisohn of Barron’s.


The widely followed KBW Bank Index can be accessed by the PowerShares KBW Bank Portfolio (NYSEArca: KBWB).