Regional Differences:

With all the chatter over interest rates, banks seem to not be getting much attention. Are investors making a mistake by doing so? They affect many areas of the market with homebuilders which can be thought of as an interest rate proxy. The ITB has had a nice run but seems to keep getting pushed back in the low 60 areas. The XLF today found a small bounce at the 33 level, which may not be a floor as it acted as a ceiling as it traded between 30-33 since 6/10. Below is the ratio chart comparing the regional bank ETF in the KRE to the XLF. It shows that capital should be overweighted in this group to the KRE. It is showing some subtle differences in the short term as over the last 3-month period the KRE is UNCH while the XLF is lower by 5%. Over the last one month period, it is outperforming slightly as well up 7% with the XLF higher by 5%. This week the KRE is “outshining” once again down .8% heading into Wednesday compared to the XLF off 1.6%. Stick with leaders within the regionals with MTB still my top pick.

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