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This Week's Featured Article Financials Are Down Big This Year, but XLF Is Looking Like a Buy-Low OpportunityWritten by Jessica Mitacek. Originally 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.
- Special Report: Elon Musk: This Could Turn $100 into $100,000
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 institutions would enjoy tailwinds during Trump’s second term. Wall Street saw the president as an ally on lower rates and looser regulation, which together were expected to create a fertile environment for firms in the financial services space. Your electric bill is up 42% since 2019, and utilities requested $31 billion in rate hikes last year alone. The culprit: AI data centers consuming power at a scale the grid was never designed to handle. The last time a bottleneck like this formed, three overlooked infrastructure stocks surged 1,700%, 1,900%, and 900% before Wall Street caught on. One analyst has identified the next candidate - earlier in the cycle, smaller, and positioned at a chokepoint that even the largest players cannot build around. See the one infrastructure stock Wall Street is about to chase More than a year into Trump’s second term, that hasn’t panned out. So far in 2026, the sector 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’ weakness creates a buy-low opportunity for investors seeking a favorable entry point. That’s especially true for the Financial Select Sector SPDR Fund (NYSEARCA: XLF), which has fallen double digits from its all-time high of $56.51 in January. What’s Been Holding Back Financials Initial expectations for further financial deregulation during Trump’s second term were high. After the largest rollback of banking regulations since the global financial crisis during his first term, many anticipated additional loosening of safeguards. That included further changes to the Dodd-Frank Wall Street Reform and Consumer Protection Act and moves to defund or dismantle the Consumer Financial Protection Bureau (CFPB). Attempts to shutter the CFPB ultimately failed, with federal courts issuing injunctions that limited unilateral action by the White House. At the same time, many financial institutions have seen 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 policy rates low, banks—especially regionals—have faced tighter NIMs, reducing overall profitability. The housing market has also 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, further pressuring mortgage lenders. Catalysts Are on the Horizon After lagging the market through Q1, there are reasons to think financials could rebound later in 2026. In March, Trump signed an executive order loosening certain lending requirements to promote mortgage lending. Meanwhile, digital-asset integration efforts, including the GENIUS Act, could open new avenues for transactional revenue, and large banks are increasingly adopting agentic AI applications that operate autonomously under human oversight to improve efficiency and lower costs. With the 10-year Treasury yield curve normalizing, NIMs should improve for smaller and regional lenders, allowing banks to better capture the spread between short-term borrowing and long-term lending. Concurrently, mortgage rates are expected to stabilize while home-price growth moderates, which would support housing affordability. For investors wanting sector exposure without betting on a single institution, the XLF provides broad coverage of financials at prices that are currently discounted. A Basket of Big Banks, Brokerages, Insurers, and Payment Processors XLF includes many household names. Its top-five holdings 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 provides a balanced allocation across financial sectors, including banks (27.3%), capital markets (25.6%), insurance (24.8%) and diversified financial services (18.4%). The XLF also pays a dividend; its 1.46% yield more than offsets the ETF’s 0.08% expense ratio. With nearly $49 billion in assets under management, XLF is the world’s largest financials ETF. Trading around $49.34, the fund is nearly 13% below its 52-week high — a discount that may not last long. Technical Indicators Hint at a Potential Reversal Although XLF is trading below both its 50- and 200-day moving averages, several technical factors are constructive. The Relative Strength Index (RSI) on the ETF’s one-year chart bottomed below 30 in mid-March—a classic signal of an oversold condition and a potential reversal. Since then, XLF has consolidated and established support around the $49 level. Since that RSI low, the indicator has climbed above 38 and is trending higher. When the RSI bottomed, it coincided with a bearish "death cross" (the 50-day moving average falling below the 200-day moving average), but that pattern could prove short-lived if momentum continues to improve. For context, the last time the RSI fell below 30 was last April during the market’s tariff-driven sell-off. XLF then rallied more than 20% by the end of May. A similar move would lift the fund to roughly $59.20, establishing a new 52-week high. | 
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