Over the past two trading sessions, treasuries are being sold hand over fist with corresponding yields soaring. Financials have exploded higher on this development. This is simply a continuation of what we've seen since the Brexit-related lows in June. Those higher yields will add profits to the bottom lines of many financial companies, especially banks ($DJUSBK) and life insurance companies ($DJUSIL). The relative strength in financials has been advancing along with the 10 year treasury yield ($TNX) since late June as you can see from the chart below:
Until Brexit, financial stocks were badly lagging the benchmark S&P 500, but that's changed in a big way since. Throw in the Trump victory yesterday and rising yields and a strong financial sector seem to now be with us for awhile. The group has become overbought, however, so it might be best to see some profit taking in the space before adding new positions or adding to existing positions.
Happy trading!
Tom
