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XLF’s Large Caps Outperform Small Caps: Investors Are Nervous

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Jun. 21 2016, Updated 10:05 a.m. ET

Market cap analysis

Large-cap stocks above $10 billion make up 87.3% of the Financial Select Sector SPDR Fund (XLF). These stocks lost 4.4% in the past year and 1% last week. In comparison, the broad market–based S&P 500 ETF (SPY) lost 1.7% during the same period. Small and mid-cap stocks—those under $10 billion in market capitalization—underperformed large-cap stocks last week and lost 3.7%. During the past year, they fell 18.9%. The underperformance of small caps relative to larger companies during the year hints at the vulnerability in the broader market. The sense is that investors choose to stay with large caps because they’re safer bets amid uncertain global conditions.

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Market cap analysis of subgroups

Large-cap banking stocks make up 47% of XLF. These stocks lost 17.4% in the past year. Small-cap banking stocks lost 19.6%. In comparison, large-cap diversified financial services stocks lost 10.9% in the trailing one year. Small-cap diversified financial services stocks lost 32.5%.

Last week, large-cap banks lost 2.8% while small-cap banks lost 5.2%. In comparison, large-cap and small-cap diversified financial services stocks lost 2.6% and 4.8% in value, respectively. Large banks with significant interest rate exposure like Bank of America (BAC), Wells Fargo (WFC), and Citigroup (C) fell 3%–4% each.

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