Direxion Daily Financial Bull 3x Shares

Once the rate hikes picked up speed in 2018, it took a toll on the banking sector as a rapid increase in interest rates reduces the value of bonds.

The S&P500 Financials GICS Level 1 is now down 2% in 2018 as of April 11, but the drop from the highs of the year in January is over 9%.

Since Donald Trump won the presidential election in 2016, the financial sector has soared on expectations of lighter regulations.

Interestingly for all the talk about financials this year, the S&P 500 GICS Level 1 Financial Sector is only up 19% vs. 17%+ for the S&P500 as a whole.

With sweater weather coming up and everyone back in school, it’s a great time to reexamine your investment strategy through the end of the year.

Summer months have a tendency to be unfavorable for the stock market. Empirical evidence has shown that average returns for the S&P 500 are negative during summer months.

The big winner since the US elections has been the financial sector, which is up 14% as of May 8, 2017.

The financial sector has performed the best since the elections. Higher interest rates are likely to improve banks’ margins going forward.

Despite the stellar run that financials (FAS) have had since the US elections in November 2016, financials are trading at very reasonable levels.

While the Dodd-Frank Act was passed to avoid another financial crisis, it has crippled banks’ profitabilities over the years due to higher capital requirements.

The dismantling of Dodd-Frank regulations for banks should improve their profitabilities, which explains why their stocks have soared since Trump’s win.