Related: Bank ETF Bouncing Back in Epic Fashion
Looking ahead, analysts project U.S. bank earnings to expand 12.8% in 2018, and BlackRock sees “scope for this number to improve.” Furthermore, the sector is trading at cheap valuations, with U.S. banks discounted by24% compared to 5% for European banks.
“XLF just wrapped up its fourth consecutive weekly gain — which represents the fund’s longest such streak since late January/early February — and on Friday touched its highest point since the financial crisis, peaking at $26.46,” notes Schaeffer’s.
Although the Fed has raised interest rates twice this year with another rate hike likely coming before the end of 2017, there are concerns about the central bank’s dovish tone and its impact on ETFs such as XLF. It is expected the Fed will boost borrowing costs one more time before the end of this year and that as many as three rate hikes could be on tap for 2018.
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