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This Month's Featured News Financials Are Down Big This Year, but XLF Is Looking Like a Buy-Low OpportunityAuthor: 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
On the eve of President Donald Trump's second inauguration, few market analysts or investment advisors were bearish on financials. Most expected banks, insurers, mortgage lenders and other financial firms to benefit from lower rates and looser regulations. Wall Street viewed the president as an ally whose policies would create a favorable environment for companies in the financial services sector. In March 1968, central banks ran out of gold and London markets shut down - miners surged 2,329%. In 1980, a COMEX delivery wall sent silver miners like Silverado up 3,989%. Today, registered gold inventory is down 25% while prices sit at record highs. Dylan Jovine of Behind the Markets says May 29, 2026 is the next inflection point - and he has identified one stock sitting on more gold than France and Italy combined. See the historical pattern and Jovine's top pick before May 29th More than a year into Trump's second term, that hasn't panned out. So far in 2026, financials are the worst-performing group among the S&P 500's 11 sectors, with a year-to-date (YTD) decline exceeding 10%. But, similar to the widely publicized tech sell-off this year, financials' weakness offers a buy-the-dip opportunity for investors seeking a favorable entry point. That outlook is especially relevant for the Financial Select Sector SPDR Fund (NYSEARCA: XLF), which is more than 10% off its all-time high of $56.51 reached in January. What's Been Holding Back Financials Expectations for further deregulation during Trump's second term were high. After major rollbacks of banking rules in his first term, many anticipated additional dismantling of safeguards. That expectation included changes to the Dodd-Frank Wall Street Reform and Consumer Protection Act and efforts to defund the Consumer Financial Protection Bureau (CFPB). Attempts to shutter the CFPB fell short, as federal judges issued injunctions preventing unilateral White House action. Financial institutions have also faced contracting net interest margins (NIM)—the difference between interest earned on loans and investments and interest paid on deposits and debt. With the Federal Reserve maintaining low rates, banks—particularly regional lenders—have experienced tighter NIMs, which compress profitability. The housing market has weighed on the sector as well. Consumer mortgage originations at large banks have fallen nearly 68% from pandemic highs, while 30-year fixed mortgage rates are at a YTD high. Catalysts Are on the Horizon After lagging the market throughout Q1, financials could rebound later in 2026. In March, Trump signed an executive order that eases lending requirements to promote mortgage lending. Digital asset integration efforts, including the GENIUS Act, could expand transactional revenue opportunities. Large banks are also increasingly adopting practical agentic AI applications that can operate autonomously under human oversight, improving efficiency and lowering costs. With the 10-year Treasury yield curve normalizing, NIMs should improve for smaller and regional lenders, allowing banks to benefit from wider spreads between short-term borrowing and long-term lending. At the same time, mortgage rates are expected to stabilize and home-price growth is forecast to moderate, which may improve housing affordability. For investors who prefer broad exposure rather than picking individual winners, the XLF provides diversified sector exposure at prices that are currently on sale. A Basket of Big Banks, Brokerages, Insurers, and Payment Processors The XLF holds 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 is well balanced 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 roughly 13% below its 52-week high — a discount that may not last long. Technical Indicators Hint at a Potential Reversal Although the XLF is trading below both its 50- and 200-day moving averages, several bullish signals are emerging. The Relative Strength Index (RSI) on the ETF's one-year chart dipped below 30 in mid-March—an oversold reading that often precedes a reversal. Since then, the ETF has been consolidating and establishing support around the $49 level. Since the RSI fell below 30, it has climbed above 38 and is trending higher. When the RSI bottomed, a bearish "death cross" occurred as the 50-day moving average slipped below the 200-day, but that pattern could prove short-lived if the RSI continues to improve. For context, the last time the RSI dropped below 30 was last April during the market's tariff-driven sell-off. The XLF rallied more than 20% through the end of May. A comparable move now would push shares toward $59.20 and establish a new 52-week high. | 
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