Financial stocks break a long streak

Providing some succor to long-underperforming investors in financials, the sector finally broke out to new highs last week.

Like we've seen market-wide, the sector's move was powered by a pretty good base of stocks. By Friday, nearly 30% of financials tickled new highs, the most in over a year.

XLF financials members at 52 week highs

There were no financials sinking to a 52-week low, so the net percentage of stocks at new highs, at nearly 30%, was still the most in over a year. While there have been many days with more stocks hitting new highs, and longer stretches without at least 29% of them doing so, this breakout still ranks among the largest, after one of the longest dry stretches, in 70 years.

Textbooks and theories tell us that this is nothing but a good sign for the sector and the broader market. A close look at the evidence suggests otherwise.

What else we're looking at

  • Full returns in financials after a jump in 52-week highs
  • How that translated to the broader stock market
  • In a post-election year, certain months have done much better than others
  • For Treasury notes and bonds, February has had a split personality

Stat Box

On Monday, the Nasdaq Composite lost more than 2%, yet more than 8.5% of securities reached a 52-week high on the Nasdaq exchange. That's the most in history for such a bad day, dating back to 1984.

Sentiment from other perspectives

Social people still like stocks. Sentiment among Twitter users is still heavily optimistic that the stock market can keep plugging away. Source: Callum Thomas

twitter stock market sentiment

That's why everyone's leaving the safety trade. ETFs that focus on "safe" assets like Treasuries, gold, and low-volatility funds, have seen a record stretch of outflows. Source: Eric Balchunas

safe haven etf fund outflow

Let's see how long they last. With a several-day plunge in some of the riskiest corners of the market, "buy the dip" is the #4 trending topic amid U.S. Twitter users. Source: Twitter

twitter trend buy the dip

The post titled Financial stocks break a long streak was originally published as on on 2021-02-23.

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