All of those stocks are top 10 holdings in XLF. XLF is coming off one of its best annual performances since the global financial crisis. While the financial services sector, the second-largest sector allocation in the S&P 500, has some doubters after last year’s impressive rally, some market observers believe the sector can keep tracking higher this year. However, XLF is off 4.6% over just the past week.
“We’re watching deposit growth — mindful of slowing and the above-average contribution from non-interest bearing deposits. Herein, we look at the distribution of retail versus institutional deposits and interest bearing versus non-interest bearing deposits, believing a portion of the institutional and non-interest-bearing deposits to be among the more price-sensitive in a rising-rate environment,” adds Credit Suisse.
Some strategists also argue that the financial sector may be a good area to look at this time around, given the potential for growth in a rising rate environment, along with potential tax and regulatory changes under the Donald Trump administration.
For more information on the financial sector, visit our financial category.