TROW - XLF: Stress Tests Passed But That's Not The Only Test
2024-07-03 16:11:03 ET
Summary
- The US Federal Reserve released annual stress test results for 31 banks, showing they are well-positioned to withstand a severe recession.
- The largest financial sector vehicle, the Financial Select Sector SPDR ETF, holds 71 stocks with the 7 largest stocks comprising nearly half of its assets.
- Despite decent stress test results, I assess XLF as an ETF that has run its course for a while, without offering compelling upside.
Late last month, the US Federal Reserve released the results of their annual “stress tests” of 31 banks and related financial companies that trade in the public markets. Depending on how one looks at the results, two possible conclusions can be drawn:
1. Despite the challenges of a rising rate environment, lag effects from those 11 Fed rate hikes during 2022 and 2023 now starting to impact consumers, and a range of other hurdles in this post-pandemic economy, the biggest lenders are doing just fine. Next to Magnificent 7 stocks, they are perceived as the stock market’s most invincible group....
XLF: Stress Tests Passed, But That's Not The Only Test