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Insurance Stocks: Power Play on Rising Interest Rates

PART:
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Part 2
Insurance Stocks: Power Play on Rising Interest Rates PART 2 OF 7

Small Caps Outperformed Large Caps the Week Ended November 20

Small-cap stocks gained last week

Large-cap stocks above $10 billion make up 87.26% of the Financial Select Sector SPDR ETF (XLF). These stocks have lost 0.2% YTD (year-to-date) but have gained 3.5% in trade during the week ended November 20. In comparison, the broad market–based S&P 500 ETF (SPY) gained 3.2% during the same period.

Small-cap stocks—those under $10 billion in market capitalization—have underperformed large caps. They lost 0.6% YTD and gained 3.4% last week. The underperformance of small caps relative to larger companies in recent weeks hinted at some vulnerability in the broader market. The sense is that investors chose to stay with large caps as they are safer bets amid uncertain global conditions.
Small Caps Outperformed Large Caps the Week Ended November 20

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Market cap analysis of subgroups

Large-cap insurance stocks make up 13.8% of the XLF portfolio. These stocks rallied 3.0% last week while small-cap insurance stocks gained 4.5%. Year-to-date, large-cap insurance stocks within the ETF have gained 2.8%, and small-cap banking stocks have gained 4.3%.

Large-cap diversified financial stocks make up 7.6% of the XLF portfolio and have fallen by 5.7% YTD. In comparison, the small-cap diversified financials stocks fell by 6.1% YTD while they gained 3.3% last week.

Year-to-date, the best performers in this subgroup are E*TRADE Financial Corp (ETFC) and the NASDAQ (NDAQ), which were up 24.8% and 25%, respectively. Meanwhile, Navient Corp (NAVI) and Franklin Resources (BEN) have lost the most value during the year, down 45% and 25.3%, respectively.

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