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Further Reading from MarketBeat.com Financials Are Down Big This Year, but XLF Is Looking Like a Buy-Low OpportunityBy Jessica Mitacek. Date Posted: 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 believed banks, insurance providers, mortgage lenders and other firms in the sector would enjoy tailwinds during Trump's second term. Wall Street viewed the president as an ally for lower rates and looser regulations—factors that together were expected to create a fertile environment for companies operating in financial services. More than a year into Trump's second term, that hasn't happened. So far in 2026, financials have been the worst-performing group 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 is trading well below its January all-time high of $56.51. What's Been Holding Back Financials From the outset, expectations for additional deregulation during Trump's second term were high. After what many regarded as the largest rollback of banking regulations since the global financial crisis in his first term, further dismantling of safeguards seemed likely. That expectation included renewed efforts to pare back the Dodd-Frank Wall Street Reform and Consumer Protection Act and to defund the Consumer Financial Protection Bureau (CFPB). Attempts to shutter or defund the CFPB fell short after federal judges issued injunctions that prevented the White House from taking unilateral action. Financial institutions have also faced contracting net interest margins (NIMs)—the difference between what banks earn on loans and investments and what they pay on deposits and debt. With the Federal Reserve maintaining low rates, banks—especially regionals—have struggled with tighter NIMs, which reduces overall profitability. The housing market has weighed on the sector as well. Consumer mortgage originations at large banks are down nearly 68% from pandemic highs, and 30-year fixed mortgage rates are at a YTD high. Catalysts Are on the Horizon After lagging the market throughout Q1, there are reasons to believe financials could rebound through the remainder of 2026. In March, Trump signed an executive order easing certain lending requirements to promote mortgage lending. Digital asset integration efforts, including the GENIUS Act, could open new transactional revenue streams, and large banks increasingly are deploying practical, agentic AI applications that operate autonomously under human oversight to boost efficiency and lower costs. With the 10-year Treasury yield normalizing, NIMs should improve for smaller and regional lenders, allowing banks to better benefit from short-term borrowing while engaging in long-term lending. At the same time, mortgage rates are expected to stabilize and home prices are forecast to moderate, which could improve housing affordability. For investors seeking exposure to the sector without picking individual winners among banks, insurers and mortgage lenders, the XLF offers broad financials exposure at currently discounted prices. A Basket of Big Banks, Brokerages, Insurers, and Payment Processors 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 offers diversified exposure 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; 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. At a current price near $49.34, the fund is trading roughly 13% below its 52-week high—though that discount may not last. Technical Indicators Hint at a Potential Reversal Although XLF is trading below both its 50- and 200-day moving averages, there are bullish signs. The Relative Strength Index (RSI) on the ETF's one-year chart dipped below 30 in mid-March—an indication the ETF was oversold and primed for a reversal. Since then, XLF has consolidated and established support around the $49 level. Since the RSI fell below 30, it has climbed above 38 and continues to trend higher. Notably, the RSI bottom coincided with a bearish death cross—when the 50-day moving average slipped below the 200-day moving average—but that technical pattern could prove short-lived if the RSI keeps improving. For context, the last time the RSI fell below 30 was last April during the market's tariff-driven swoon. XLF then rallied more than 20% by the end of May. A similar move from current levels would push shares toward $59.20 and establish a new 52-week high. | 
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