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Volatile Year for Financials as the Fed Kept Investors Guessing


Jan. 5 2016, Updated 9:28 a.m. ET

XLF falls 3.6% in 2015

Since the beginning of 2015, investors have been watching the financial sector closely. After an impressive start, banking stocks have been on a roller coaster ride with the Federal Reserve keeping investors guessing on interest rate policy. Banks have performed well with every development on the interest rate situation. They have surged on any positive commentary from the Fed, even on positive economic data.

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The Financial Select Sector SPDR ETF (XLF) serves as a barometer for US financial stocks. It closed at $23.8 on December 31, falling 1.3% for December and 3.6% during the year. The Vanguard Financials ETF (VFH) and the iShares Financials ETF (IYF) generated returns of -2.6% and -2.2%, respectively, in 2015. The SPDR S&P Insurance ETF (KIE) added 0.3% while the SPDR S&P Regional Banks ETF (KRE) rose by 4.3%. Comparatively, broad markets represented by the S&P 500 SPDR ETF (SPY) fell 0.8% during the same period.

On average, most sub-groups within the XLF ETF fell during the year, with the highest losses coming from diversified financial services stocks followed by banks. Diversified financial services stocks within the XLF ETF fell 10.0% last year while banks fell 3.6%.

Stock performance

The majority of the constituents of XLF that seek to replicate the performance of the S&P Financial Select Sector Index posted positive returns during the year. Of the 87 stocks in the portfolio, 36 stocks rose during the year. The stocks that rose the most were Public Storage (PSA), Chubb (CB), and E*Trade Financial (ETFC). They rose 32.3%, 28.9%, and 23.5%, respectively, during the year. Meanwhile, the stocks that underperformed were Genworth Financial, Navient Corp, and Host Hotel & Resorts. They generated negative returns of 55.8%, 47.5%, and 35.6%, respectively.


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