How Did XLF’s Subsectors Perform Last Week?



What drove the financial sector last week?

In the United States, the broad-based S&P 500 SPDR ETF (SPY) gained 1.2% last week as commodity prices recovered and jobs data turned out to be better-than-expected. In March 2016, non-farm payrolls rose 215,000, beating Wall Street’s estimate of 205,000 while the unemployment rate increased to 5%.

Since the beginning of the year, global stock markets have been on a roller coaster ride hit by worries of slowing economic growth and plunging oil prices. The financial sector is a leading indicator of market declines historically and has been the worst affected by this global sell-off. However, the losses incurred since the beginning of the year have been offset by gains in the past month.

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XLF’s insurance stocks outperform

The Financial Select Sector SPDR (XLF) ETF closed at $22.70 on April 1, up 1.9% in the trailing five days. Comparatively, other financial ETFs like the Vanguard Financials ETF (VFH) and the iShares Financials ETF (IYF) generated returns of 1.9% and 2.1% during the same period.

While most subgroups within the financial sector generated positive returns last week, REITs and insurance stocks gained the most. Insurance stocks included within the Financial Select Sector SPDR ETF (XLF) portfolio gained 2.2% while REITs surged 2.8%. Insurance brokers and life insurance stocks gained the most value and surged 3.2% and 2.6%, respectively. US life insurance premiums grew at their fastest pace in four years as life insurers reversed the flat or negative growth rates experienced in previous years. Life insurers in the US combined posted 4.5% growth in direct written premiums in 2015 compared to 2.4% in 2014.

All of the 21 insurance stocks included in the XLF portfolio delivered positive returns during the last week, led by MetLife (MET), Aon (AON), and American International Group (AIG). These stocks gained 5.3%, 3.7%, and 3.6%, respectively. Meanwhile, Loews (L), Torchmark (TMK), and Chubb underperformed the insurance stocks within the XLF ETF and gained 0.44%, 1.0%, and 1.0%, respectively.


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