The SPDR S&P Regional Banking ETF (NYSEArca: KRE), the largest regional bank ETF, would also like to see higher interest and a more hawkish Fed.
KRE and rival regional bank ETFs were banking on higher interest rates to boost their fortunes. Higher interest rates would help widen the difference between what banks charge on loans and pay on deposits, which would boost earnings for the financial sector. Regional banks are among the stocks most positively correlated to rising interest rates because higher rates improve net interest margins.
“However, not only is the Financial Select Sector SPDR Fund the worst ETF to own in the month of June, it’s also the worst to own the week of a Fed meeting. In the past 10 years, XLF has lost an average of 3.4% in the month of June, according to data from Schaeffer’s Senior Quantitative Analyst Rocky White. In Fed weeks since 2015, the XLF has averaged a loss of 1.38% — the absolute worst — with a win rate of just 37%,” according to Schaeffer’s.
For more information on the financial sector, visit our financial category.