In recent years, two sectors have outperformed the broad stock market: technology and health (biotech being part of it).
For 2017, we expect the financial sector to join the group of outperformers. That is directly linked to the primary market trend, which we discussed at length in previous articles, as recent as this week in The Primary Market Trend Of 2017.
The underlying fundamental “rationale” behind the recent breakout is that rising rates will bring a higher yield on loans (banks), pensions (insurances), etc.
The chart of financials (represented by the XLF ETF) shows a text book pattern: a breakout followed by a successful retest (this week). The most likely path forward is a continuation of the breakout, and, consequently, bullish momentum and energy.
We expect financial stocks to rise to all-time highs in the coming weeks. They have some 25% upside potential in 2017.
Some interesting financial stocks which are breaking out: Comerica (symbol CMA), Suntrust Banks (symbol STI), Regions Financial Corp. (symbol RF).