Insights: Bullish Financail Stocks
Upgrading Financials to OverweightFinancials are reassuming a leadership role, a move backed by a bullish inflection in interest rates. As seen below, the Financial SPDR's (XLF) relative strength trend is staging a breakout from its summer-long consolidation. From a technical perspective, this warrants an upgrade to overweight.
Internally, most Groups are participating in the Sector's comeback, including:
• Banks: As direct benefactors of rising rates, bank stocks are overtaking resistance, which is visible in the KRE and KBE ETFs, as well as our regional-focused Groups, including names like RF and STI... see page 2
• Asset Managers: This Group, which we highlighted in a global Insights report last week, contains widespread base breakouts including APAM and BX...see page 3
• Credit Card Issuers: Seeing one of the largest, week-over-week leaps in RSR rankings, this Group contains actionable inflections in names like DFS and COF... see page 4
• Investment Banks/Brokers: Led by JPM, the Group is breaking out from a YTD consolidation. Individual patterns range from GS's breakout above secular resistance to SF's multi-month base breakout... see page 5
• Insurers: Insurers are hit-or-miss, from a technical perspective, but this industry does include attractive base patterns, such as MET and VOYA... see page 6
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Our process begins by organizing all actively traded stocks into coherent sectors, then into logical industry groups. We then apply our proprietary relative strength tools to identify developing price trends. Once attractive trends are identified within a selected sectors or groups, we screen for individual stocks which we believe offer the best risk/reward profile. Vermilion offers U.S. and global equity market research products. Vermilion’s research team, which has received numerous awards and accolades, has a combined 70 year of experience in the analysis of investment securities.
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