Here's Why Earnings Won't Derail Bank ETFs

Fourth-quarter earnings season for the financial services sector kicks-off this week and there are some concerns about how those reports will impact individual bank stocks and exchange traded funds, such as the Financial Select Sector SPDR (NYSEArca: XLF).

While several marquee members of XLF’s lineup recently announced fourth-quarter charges related to tax reform, some analysts believe Wall Street will be focusing more on 2018 rather than fourth-quarter earnings.

“Who cares what happens in the fourth quarter? It’s ancient history,” Dick Bove of Vertical Group said in an interview with CNBC. “What we care about is if we get this investment banking thing going, if we get these loans happening, banks will make a lot of money in 2018.”

Amid expectations for more interest rate hikes in 2018, the financial services sector could be working its way into a period of long-term out-performance. The recent rally in the sector could still be in the early innings, according to some market observers.

Deregulation could also help the financial sector improve their margins. President Donald Trump has shown its eagerness in cutting back the red tape and remove some of the post-financial crisis regulations that has stifled the industry.