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This Month's Exclusive Story
Financials Are Down Big This Year, but XLF Is Looking Like a Buy-Low OpportunitySubmitted by Jessica Mitacek. First Published: 3/29/2026. 
Key Points
- Despite early optimism that President Trump’s second term would fuel financials through deregulation and lower rates, the sector is the worst performer so far in 2026.
- Growth has been stifled by legal hurdles, contracting net interest margins, and a significant 68% drop in mortgage originations compared to pandemic highs.
- The XLF is offering a buy-low opportunity amid new executive orders on lending, AI efficiency gains, and technical indicators suggesting that a potential price reversal is in play.
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If you spoke with market analysts and investment advisors on the eve of President Donald Trump’s second inauguration, you would have been hard-pressed to find anyone who was bearish on financials. Most experts agreed that banks, insurance providers, mortgage lenders and other financial firms would enjoy tailwinds during Trump’s second term. Wall Street saw the president as an ally on lower rates and looser regulations that together would create a fertile environment for companies in the financial services space.
There's a company sitting on a deposit independently valued at $2.8 billion - currently trading at a market cap of roughly $700 million. That's a 4-to-1 disconnect.
The Pentagon has already invested. Lockheed's Skunk Works signed a research partnership, and the EXIM Bank is processing up to $800 million in financing. A federal deadline of July 13, 2026 is forcing the issue.
The stock is still trading under $6. Check the valuation math and get the ticker now
Over a year into Trump’s second term, that hasn’t been the case. So far in 2026, that cohort of stocks has been the worst performer among the S&P 500’s 11 sectors, with a year-to-date (YTD) loss exceeding 10%. But like the well‑publicized tech sell-off this year, financials’ struggles present a buy‑low opportunity for investors seeking a favorable entry point. That’s particularly true of the Financial Select Sector SPDR Fund (NYSEARCA: XLF), which has fallen a double-digit percentage from its all-time high of $56.51 in January. What’s Been Holding Back FinancialsEarly in the term, expectations for additional financial deregulation were high. After the significant rollback of banking rules during his first term, Trump was expected to pursue further loosening of safeguards, including changes to the Dodd‑Frank Wall Street Reform and Consumer Protection Act and efforts to defund the Consumer Financial Protection Bureau (CFPB). His attempts to shutter the CFPB fell short, however, as federal judges issued injunctions that limited unilateral action by the White House. Financial institutions have also faced contracting net interest margin (NIM)—the difference between what banks earn on loans and investments versus what they pay on deposits and debt. With the Federal Reserve keeping rates low, banks—especially regional ones—have been operating with tighter NIMs, reducing overall profitability. The housing market has further weighed on the sector. Consumer mortgage originations at large banks have fallen nearly 68% from pandemic highs, and rates for 30‑year fixed loans are at a YTD high. Catalysts Are on the HorizonAfter trailing the market throughout Q1, there are reasons to believe financials could rebound later in 2026. In March, Trump signed an executive order loosening lending requirements to promote mortgage lending. Meanwhile, digital asset integration efforts, including the GENIUS Act, could open new avenues for transactional revenue. Large banks are also increasingly adopting practical agentic AI that can operate autonomously under human oversight, improving efficiency and lowering costs. With the 10‑year Treasury yield normalizing, NIM should improve for smaller and regional lenders, enabling banks to better capitalize on short-term borrowing adjacent to long-term lending. Concurrently, mortgage rates are expected to stabilize while home prices moderate, which could improve housing affordability. For investors seeking exposure to the sector without picking individual winners, the XLF offers broad financial-sector coverage at prices that are currently on sale. A Basket of Big Banks, Brokerages, Insurers, and Payment ProcessorsAmong the XLF’s holdings are household names. Its top five positions include Berkshire Hathaway (NYSE: BRK.B), JPMorgan Chase (NYSE: JPM), Visa (NYSE: V), Mastercard (NYSE: MA), and Bank of America (NYSE: BAC). The fund’s portfolio allocates across financial industries, including banks (27.3%), capital markets (25.6%), insurance (24.8%) and diversified financial services (18.4%). The XLF also pays a dividend with a yield of 1.46%, which more than offsets the ETF’s expense ratio of 0.08%. With nearly $49 billion in assets under management, the XLF is the world’s largest financials ETF. At a current price around $49.34, the fund is trading nearly 13% below its 52‑week high — but those discounted shares may not remain on sale for long. Technical Indicators Hint at a Potential ReversalAlthough the XLF is trading below both its 50‑ and 200‑day moving averages, several bullish technical signals have emerged. The Relative Strength Index (RSI) on the ETF’s one‑year chart fell below 30 in mid‑March—an oversold reading—and has since been consolidating and establishing support near the $49 level. Since that dip, the RSI has climbed above 38 and is trending higher. When the RSI bottomed, it coincided with a bearish death cross— the 50‑day moving average slipped below the 200‑day moving average—but that pattern could be short‑lived if the RSI continues to improve. For context, the last time the RSI fell below 30 was in April of last year during the market’s tariff‑related turbulence. The XLF then rallied more than 20% before the end of May. A similar move from current levels would bring shares to roughly $59.20, establishing a new 52‑week high. |
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