Financial Services Sector with a Trading Strategy | Rules, Backtest, and Practical Example
With the tight regulations that followed the 2008/2009 financial crisis, this sector has been stable with steady growth. But let’s see what it has to offer.
In this article, we discuss the US financial sector and we show you an example of a financial services trading strategy. The sector is great for trading due to the high volatility.
What is the S&P Financial Services sector?
The S&P 500 Financial Services sector consists of those companies included in the S&P 500 that are classified as members of the GICS Financial Services sector. The companies in the sector provide financial services to individuals, SMEs, and corporations. They include traditional banks, investment houses, and insurance firms, as well as the recently growing fintech industry.
A capitalization-weighted index of this sector is tracked by Vanguard Financials ETF (VFH) and Financial Select Sector SPDR Fund (XLF).
What are the 5 biggest stocks in the sector?
Five of the biggest stocks by market capitalization in the S&P financial sector include:
Berkshire Hathaway Inc. (BRK-A) and (BRK-B): Through its subsidiaries, the company invests in different kinds of businesses, including insurance, freight rail transportation, and utility businesses, all over the world. There are two classes of Berkshire Hathaway stock: Class A (BRK-A) and Class B (BRK-B). Class A stocks have voting rights and are more expensive than Class B stocks which do not have voting rights. As of July 21, 2022, Berkshire Hathaway Inc. has a market capitalization of $631.802B.
JP Morgan Chase & Co. (JPM) and (JPM-PC): JP Morgan Chase & Co. is an American multinational financial service provider. It is the largest bank in the United States as of 2022, and the largest bank in the world by market cap. As of July 21, 2022, JP Morgan Chase and Co. (JPM) and (JPM-PC) have a total market cap of $336.74B and 343.162B respectively.
Bank of America Corporation (BAC-PK): Through its subsidiaries, the bank provides banking and financial products and services for individual consumers, small and middle-market businesses, institutional investors, large corporations, and governments worldwide. It also offers investment services and products, residential mortgages, and home equity loans. It has a market cap of $253.827 billion as of July 2022.
Citigroup Inc. (C): The bank provides various financial products and services to consumers, corporations, governments, and institutions in North America, Latin America, Asia, Europe, the Middle East, and Africa. Operating via its Global Consumer Banking (GCB) and Institutional Clients Group (ICG) segments, the bank offers traditional banking services to retail customers, including Citi-branded cards and Citi retail services, and lending. It also provides investment services through a network of local branches, offices, and electronic delivery systems, as well as offers wholesale banking products and services, including fixed income and equity sales and trading, foreign exchange, prime brokerage, and corporate lending. Its market cap as of July 21, 2022, is $146.347 billion.
Goldman Sachs Group Inc (GS): This financial institution provides a range of financial services for corporations, governments, and individuals worldwide. It offers investment banking, global markets, asset management, and consumer & wealth management. Its services include financial advisory services, such as strategic advisory assignments related to mergers and acquisitions, divestitures, corporate defense activities, restructurings, and spin-offs. As of July 21, 2022, its market cap is $110.401 billion.
However, by the time you read this article, the 5 biggest financial stocks might have