Market overview
It is true that the opportunity cost of remaining bearish throughout 2016 has been rather high. Nonetheless, despite successfully proposing financials (XLF) as a potential "long" pick in the first half of September, I have recently turned rather sceptical on the sector. As the SPDR Financials ETF has gotten considerably more expensive since the publication of my analysis, I maintain the view that the sector - and especially the ETF's largest constituents - might have already reached an intermediate top as the market expects the Fed to remain cautious (and slow) with the rate hiking process.
Even though the major U.S. banks will remain a popular trade on the street in the coming months (see Steve Eisman's bullish take here) due to the expectations of Dodd-Frank deregulation and corporate tax rate decreases, many continue to question the extent to which President-elect Trump will be able to deliver… Read More …