The SPDR S&P Bank ETF (NYSEArca: KBE) and the SPDR S&P Regional Banking ETF (NYSEArca: KRE), the largest regional bank ETF, have also recently languished despite higher interest rates.
“Long-term growth expectations impact the ‘long end’ of the yield curve, referring to long-dated Treasury notes like the 10- and 30-year yields, which are not keeping pace with short-dated Treasury yields like that on the 2-year note,” according to CNBC. “While banks typically do well when interest rates rise, the reality is a steeper yield curve lends itself to greater profitability for the banks themselves.”
Related: Dodd-Frank Rollback Not a Credit Issue for Banks
Fortunately, the financial services sector is widely regarded as perhaps the only sector in the U.S. that is attractively valued relative to the broader market and its own long-term averages. The financial sector valuations still look relatively cheap, compared to the broader market. The sector’s valuations are still about 25% below the average since the early 1990s.
For more information on the financial sector, visit our financial category.