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Could the Financial Sector Recover in June?

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The financial sector in May

Investors should assess whether the financial sector could recover in June after its poor May performance. Previously in this series, we discussed how the broader-market S&P 500 (SPY) gained in May despite various macro events.

Political factors affected market movement and various S&P 500 sectors. The Financial Select Sector SPDR ETF (XLF) fell 1% in May, and had fallen 1.2% year-to-date as of June 4.

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Factors impacting the financial sector

Despite major financial companies seeing strong earnings growth, the overall sector was weak. Ongoing discussions about rolling back Dodd-Frank regulations are affecting some financial stocks. Conversely, the Fed’s gradual rate hike process is expected to grow some financial companies’ profit margins. Leading investment company JPMorgan Chase (JPM) recently said that the financial sector could boost the S&P 500 to new highs.

Major XLF holdings Citigroup (C), JPMorgan Chase, and Bank of America (BAC) fell 1.8%, 1.6%, and 2.4%, respectively, in May. In the next part of this series, we’ll analyze the technology sector’s performance in May.

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