Market cap analysis
Large-cap stocks above $10 billion make up 87.3% of the Financial Select Sector SPDR ETF (XLF). These stocks have fallen 9.7% in the past one year but have risen 1.9% during the trailing five days that ended February 26, 2016. In comparison, the broad-market-based SPDR S&P 500 ETF (SPY) has risen 1.6% during the same period.
Small-cap stocks under $10 billion market capitalization outperformed large-cap stocks last week and rose 3.5%. The sense was that the global sell-off has eased for now and investors may be turning bullish. It remains to be seen whether this outperformance was temporary.
During the past one year, small-caps have underperformed large-caps, falling ~23%. The underperformance of small-caps relative to larger companies during the year hints at the vulnerability in the broader market. The feeling is that investors choose to stay with large-caps, as they are safer bets in uncertain global conditions.
Market-cap analysis of subgroups
Large-cap banking stocks make up 47% of XLF’s portfolio. These stocks fell 15.9% in the last one year, while small-cap banking stocks fell 20.6%. In comparison, large-cap diversified financial services stocks fell 15.3% in the trailing one year, while small-cap diversified financial services stocks fell a whopping 36.1%.
Last week, large-cap banks returned 1.6%, while small-cap banks rose 1.7%. In comparison, large-cap and small-cap diversified financial services stocks rose 1.9% and 6.1%, respectively, in value. Genworth Financial (GNW), Weyerhaeuser (WY), and E*Trade Financial (ETFC) led the gains in the financial sector. These stocks rose 12.9%, 11.9%, and 7.8%, respectively, during the trailing five days ended Friday, February 26.
In the next part, we’ll see why diversified financial services stock outperformed last week.