3 Reasons This Post-Election Shift in Bank Stocks Surprised Me

Short interest has increased on Financial Select Sector SPDR ETF (XLF) and SPDR KBE Regional Banking ETF (KRE) stocks since the election

Senior Vice President of Research
Jan 5, 2017 at 10:35 AM
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After eyeballing a few short interest charts on banking stocks, I asked Schaeffer's Quantitative Analyst Chris Prybal to put together pre-election-through-present short interest changes on top holdings in the Financial Select Sector SPDR ETF (XLF) and SPDR KBW Regional Banking ETF (KRE). The tables below echo what I saw in a few charts: increases in short interest on banking names since pre-election levels.  

I found this interesting in the context of three things: price action, as financial stocks have rallied since the election; the BofA-Merrill Lynch (BAML) survey showing fund managers overweight this group; plus, the media coverage about a Trump victory (less regulation) and rising long-term rates being good for banks. I thought short covering would accompany some of the moves we have seen in these stocks, but that has not been the case, with the exception being BB&T Corporation (NYSE:BBT); in fact, we've seen many double-digit percentage increases in short interest on big-cap banking stocks. (Note: A couple of the top XLF holdings are insurers, so I did not highlight the changes on these symbols in the table below.)

Top XLF Components Since Nov. 1
XLF components Jan 5

Top KRE Components Since Nov. 1
KRE stocks Jan 5

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