Financial Stocks Record Longest Losing Streak in The First Half of 2018
XLF Records Longest Losing Streak
Early in the year, financial stocks were allegedly considered to be the favorites of most investors. Analysts believed that the deregulation measures by the Trump administration coupled with the increasing efforts of the Federal Reserve would have created a favorable atmosphere for financial stocks to thrive and rank high on indexes.
However, reports have revealed that financial stocks have grossly performed below the market expectations for the first half of 2018. Thus, even though the financial tracking-XLF showed reasonable positive signs in recent sessions, the posting, however, came after its 13 days longest losing streak.
Analysts have surmised that things could still get worse for the financial stocks. While addressing a media outlet, Craig Johnson, the chief market technician at Piper Jaffray gave a reason why there were more pain days ahead for the financial stocks. Johnson stated that the technical picture for the financial stocks has remained cloudy.
Although owing to the previous situation, bank stocks could be said to have witnessed a substantial positive stress test results last week,however, their stocks still closed lower than expected last week and the chart remained unclear. The XLF reportedly bounced off support and came close to the $26.50 mark. Fingers have been crossed to see how long the recent bounce would be.
Sources claimed that the advancement in the financial stocks as compared to the declining number of the stocks remained weak since only 25% of the stocks within the financials are currently trading above their 200-day moving averages. At that rate, the stocks were still the lowest record of any S&P 500 sector.
Piper Jaffray revealed that the XLF generated positive average returns of 6% and 2.3% respectively over the last four weeks consecutively. However, some analysts mentioned that the forecast ran contrary to the usual trend of XLF performance whenever it posted losing streaks for seven days or more.
Analysts Warn Investors
Analysts have also advised investors to seek out small and mid-cap banks instead of large-cap financial institutions as the smaller cap banks were more constructive based on their breadth, momentum and, strength.
While the general market of S&P 500 index closed on a positive note in the first half of this year, Financials, however, had a poor performance during that period and the low performance weakened the overall performance of the S&P 500 index. The Financial Select Sector SPDR ETF (XLF) that tracks the performance of the financial sector reportedly dropped with about 4.7% in the first half of this year, and the XLF ETF fell with 2.1% last month. In June, Bank of America (BAC) returned -2.9%, JPMorgan (JPM) dropped with 2.6%, and Citigroup (C) dropped with 0.3%.
Factors Affecting XLF Performance
The recorded improvements in the earning growths of core financial stocks did not have a direct impact on stocks in the financial sector. As already stated, the sector witness performed poorly in the first half, and sources claimed that the increasing trade tension affected the sector’s performance. In general, the financial sector has shown signs of weakness as several banks have had to deal with smaller margins in their trading units.
However, analysts have reported that if the three additional rate hikes of the Federal Reserve occur before the end of the year, the hikes would positively affect the US financial stocks as it would most likely lead to an increase in profit margin.
Economists have recorded that interest rate policy would continue to provide momentum for banks or any other lenders and insurers because increased rates made financial instruments that are rate-sensitive more appealing. Several rate-sensitive financial instruments are being sold and traded by banks to act as a supplement for short-term lending. Even though the demand is currently on the high among long-term borrowers, the increasing lending rates may dissuade long-term borrowing.
More in Business
-
`
Brad Pitt’s ‘Semi-Retirement’ Plans
Brad Pitt, known worldwide for his Academy Award-winning acting and top-notch production skills, is not just a Hollywood sensation; he’s a...
December 9, 2023 -
`
Streaming Giant Netflix Faces Yet Another Challenge
In the ever-evolving landscape of streaming entertainment, Netflix, once the unchallenged king of digital content, now faces a complex puzzle beyond...
December 1, 2023 -
`
Signs You Should Quit Your Current Job & Move On
You Don’t Feel Comfortable at Work Imagine spending the majority of your waking hours in a place where you feel uneasy,...
November 20, 2023 -
`
How to Adjust and Renew Your Portfolio
Investing in the financial world is like navigating an ever-changing landscape—constantly evolving, always shifting. The key to staying on track? Regularly...
November 18, 2023 -
`
Dr. Dre’s Divorce With Nicole Young: A Closer Look
When the beats of old-school hip-hop start bumping, Dr. Dre’s name reverberates in fans’ minds worldwide. Born as Andre Young, this...
November 12, 2023 -
`
Why Branded Content Is the Best Way to Connect With Your Audience
Have you ever found yourself deep in a compelling article or engrossed in a video series, only to later discover that...
November 5, 2023 -
`
Why the Gender Pay Gap Could Be Getting Worse | New Research Findings
At a time when women are making significant strides in various professional arenas, a new report throws light on a trend...
October 28, 2023 -
`
What Is a Bull Market and How Can Investors Benefit From One?
In finance, the term “bull market” is frequently used to describe a period of optimism, rising asset prices, and investor confidence....
October 19, 2023 -
`
A-List Power Couples Where the Women Make More Money
In an era of shifting gender roles and evolving definitions of success, it’s increasingly common to find celebrity couples where the...
October 15, 2023
You must be logged in to post a comment Login