Financial services stocks and exchange traded funds, such as the Financial Select Sector SPDR (NYSEArca: XLF), have recently had the wind at their backs. This month, the Federal Reserve helped XLF and rival bank ETFs with its interest rate increase of 2016 while unveiling expectations for three more interest rate hikes next year.
Prior to that, the financial services sector was buoyed by Donald Trump’s surprise victory in the U.S. presidential election in November. XLF’s year-to-date gain now resides just under 25%, good for one of the best showings among non-leveraged sector ETFs.
In addition to corporate tax reductions, Trump is looking to ease the regulatory burdens faced by many of the big name companies in ETFs like XLF.
Trump has said he would “dismantle” financial reform, or the Dodd-Frank financial reforms, that have caused big banks to take on increased capital requirements to obviate another depression event associated with high-risk debt.
However, Trump’s deregulation efforts for the financial services industry have some doubters.