HomeMarket News XLF: Financials Sector Shines in 2023 XLF: Financials Sector Shines in 2023

XLF: Financials Sector Shines in 2023 XLF: Financials Sector Shines in 2023

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Financial Select Sector SPDR Fund ETF (NYSEARCA:XLF), which tracks the S&P 500 financials sector, demonstrated a noteworthy turnaround in 2023, surging by 9.7% after experiencing a 12% decline in 2022.

The financials sector’s resurgence, while commendable, trailed behind the broader S&P 500’s surge of around 25%. The sector grappled with tumult early in the year when the banking system faltered in March, sending it to considerable lows; however, it rebounded particularly in the latter part of the year.

Industry Performances in 2023

The sector initially faced challenges in a higher interest rate environment and endured a regional bank collapse in March. Nevertheless, stability prevailed after the Federal Reserve opted to maintain rates unaltered in the latter months. Within the sector, banks managed to ascend by 6.2%, while financial services attained a solid 13.8% gain in 2023.

While there were fluctuations in U.S. stock fund flows into and out of the financials sector, the financials-focused ETF witnessed a net outflow of $280.65M.

Top 5 Movers in 2023

Gainers: Blackstone (BX) soared by 79%, Cboe Global Markets (CBOE) climbed by 42%, Capital One Financial (COF) achieved a 41% increase, Moody’s (MCO) rose by 40%, and Assurant (AIZ) exhibited a robust growth of 35%. However, on the flip side, The Charles Schwab (SCHW) encountered a 17% decline, while KeyCorp (KEY), Comerica (CMA), Truist Financial (TFC), and PayPal Holdings (PYPL) suffered declines of 17%, 17%, 17%, and 14%, respectively.

Analysts’ Expectations

Some industry analysts maintain a guarded sentiment about XLF’s outlook in 2024. A contributor, Harrison Schwartz, expressed concerns about at-risk financial stocks, foreseeing potential strains from ongoing issues that may have surfaced in 2023 and continue exerting pressure in 2024. Schwartz further pointed out that bank margins are expected to diminish with higher deposit costs, potentially leading to a natural slowdown in profits for capital markets and financial services firms.

Contrastingly, Sam Stovall, chief investment strategist of CFRA Research, emphasized that the financial sector, especially the regional bank subsector (KRE), has been strengthening its fundamentals and technicals. He underscored the positivity stemming from expectations of sustained economic growth and the absence of an impending recession in 2024.

Quantitative Measures

According to SA quantitative system, XLF has garnered a Buy rating with a 4.04 score. The stock’s grade in the risk category is a concerning D; however, it received favorable grades for momentum (A-), dividends (B+), liquidity (A+), and expenses (A).

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