Bespoke’s Hickey: History Hints at a 2012 Rally in Financials (XLK, XLF, KBE, KRE, RKH)
If past is prologue, and it generally is in markets as in life, the Financial sector could be poised for a decent rally in the next 12 months. At least that’s the assertion of Paul Hickey, the co-founder of Bespoke Investment Group. Hickey’s theory doesn’t rely on a sweeping solution to the European debt crisis or other fundamental imponderables. He’s focusing on the similarities between the trading in bank stocks today and the price moves in Technology stocks after the tech bubble implosion a decade ago.
Back in 2002 the question was whether or not the stock market as a whole could ever trade higher without the technology stocks that had led the rally over the prior five-years. Two years later the NASDAQ had doubled from its lows, yet was still down 2/3′s of its value at the highs and struggling to find a bid.
Today traders are focused on whether or not the broader market can rally without the financial stocks, a sector that started collapsing in 2007, bottomed in 2009, and has now doubled from those lows. The group has had a horrid 2011, leaving the Financial Sector SPDR etf (NYSEArca:XLF) down 66.5% off its 2007 top. For those who rather read than play with numbers, 66.5% and 2/3′s are effectively the same number.
See the full “Breakout” interview below:
Related ETFs: Technology Select Sector SPDR (NYSEArca:XLK), Financial Select Sector SPDR (NYSEArca:XLF), SPDR S&P Bank ETF (NYSEArca:KBE), SPDR S&P Regional Banking ETF (NYSEArca:KRE), Regional Bank HOLDRS (NYSEArca:RKH)