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Behind the Markets
Financials Are Down Big This Year, but XLF Is Looking Like a Buy-Low Opportunity
Submitted by Jessica Mitacek. Article Published: 3/29/2026.
Key Points
- Despite early optimism that President Trump’s second term would fuel financials through deregulation and lower rates, the sector is the worst performer so far in 2026.
- Growth has been stifled by legal hurdles, contracting net interest margins, and a significant 68% drop in mortgage originations compared to pandemic highs.
- The XLF is offering a buy-low opportunity amid new executive orders on lending, AI efficiency gains, and technical indicators suggesting that a potential price reversal is in play.
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If you spoke with market analysts and investment advisors on the eve of President Donald Trump’s second inauguration, you would have been hard-pressed to find anyone who was bearish on financials.
Most experts agreed that banks, insurers, mortgage lenders and other firms in the sector would enjoy tailwinds during Trump’s second term. Wall Street viewed the administration as supportive of lower rates and looser regulation—factors that together were expected to create a favorable environment for financial services companies.
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So far in 2026, financials are the worst-performing cohort among the S&P 500’s 11 sectors, with a year-to-date (YTD) loss exceeding 10%. But, as with the well-publicized tech sell-off this year, financials’ weakness may present a buy-low opportunity for investors seeking a favorable entry point. That’s particularly true for the Financial Select Sector SPDR Fund (NYSEARCA: XLF), which has fallen double digits from its January all-time high of $56.51.
What’s Been Holding Back Financials
From the outset, expectations for further financial deregulation during the president’s second term were high. After the large rollback of banking rules during his first term, many anticipated additional rollbacks to laws such as the Dodd-Frank Wall Street Reform and Consumer Protection Act and efforts to defund the Consumer Financial Protection Bureau (CFPB). Attempts to curtail the CFPB ultimately fell short, with federal judges issuing injunctions that limited unilateral action by the White House.
At the same time, many financial institutions have seen contracting net interest margins (NIM)—the difference between interest earned on loans and investments and interest paid on deposits and debt. With the Federal Reserve keeping rates low, banks—especially regional ones—have faced tighter NIMs and reduced profitability.
The housing market has also weighed on the sector. Consumer mortgage originations at large banks are down nearly 68% from pandemic highs, and rates for 30-year fixed loans are at a YTD high, dampening mortgage activity.
Catalysts Are on the Horizon
After trailing the market through Q1, there are reasons to think financials could rebound later in 2026. In March, the president signed an executive order easing certain lending requirements to encourage mortgage lending.
Meanwhile, efforts to integrate digital assets—exemplified by legislation like the GENIUS Act—could open new transactional revenue streams. Large banks are also increasingly adopting practical agentic AI applications that operate autonomously under human oversight, improving efficiency and lowering costs.
As the 10-year Treasury yield curve normalizes, NIMs should improve for smaller and regional lenders, enabling them to better capitalize on short-term funding adjacent to long-term lending. Concurrently, mortgage rates are expected to stabilize and home-price appreciation to moderate, which could improve housing affordability.
For investors seeking exposure without picking individual winners among banks, insurers or mortgage lenders, the XLF provides broad sector coverage at prices that are currently on sale.
A Basket of Big Banks, Brokerages, Insurers, and Payment Processors
The XLF includes many household names. Its top-five holdings are Berkshire Hathaway (NYSE: BRK.B), JPMorgan Chase (NYSE: JPM), Visa (NYSE: V), Mastercard (NYSE: MA), and Bank of America (NYSE: BAC).
The fund’s portfolio is diversified across industry subgroups, including banks (27.3%), capital markets (25.6%), insurance (24.8%) and diversified financial services (18.4%).
The XLF also pays a dividend with a yield of 1.46%, which more than offsets the ETF’s expense ratio of 0.08%.
With nearly $49 billion in assets under management, XLF is the world’s largest financials ETF, and at a current price around $49.34 the fund is trading roughly 13% below its 52-week high—an attractive valuation that may not last long.
Technical Indicators Hint at a Potential Reversal
Although XLF is trading below both its 50- and 200-day moving averages, there are bullish technical signs. The Relative Strength Index (RSI) on the ETF’s one-year chart fell below 30 in mid-March—an oversold signal often followed by a reversal. Since then, XLF has consolidated and established support around the $49 level.
Since the RSI dipped below 30 it has climbed above 38 and continues to trend higher. Notably, the RSI bottom coincided with a bearish death cross (the 50-day moving average falling below the 200-day), but that pattern could be short-lived if momentum keeps improving.
For context, the last time the RSI dropped below 30—during last April’s tariff-driven sell-off—the XLF rallied more than 20% by the end of May. A similar move now would push shares toward about $59.20 and establish a new 52-week high.
LendingClub: A Digital Bank Growing Again Like a Fintech
Submitted by Peter Frank. Article Published: 4/5/2026.
Key Points
- LendingClub’s hybrid bank and marketplace model provides flexibility across credit cycles, which could smooth revenue streams.
- Strong growth, including 33% loan origination increases, highlights improving fundamentals despite market skepticism.
- Credit-cycle risk, competition, and earnings volatility remain key concerns for investors.
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LendingClub (NYSE: LC) may be underappreciated—if consumers keep borrowing and the company can fend off competition.
Those are big ifs. But with recent strong financials, a new chairman and management optimism, the company appears to be making a compelling case that Wall Street hasn't fully caught up yet.
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See Marc Chaikin's full market warning and his top sell call nowSince acquiring a bank charter in 2021, LendingClub has reinvented itself. It operates both as a bank—holding loans and earning net interest income—and as a marketplace—selling loans to institutional investors and earning capital-light fees. This hybrid model allows LendingClub to lean on the more attractive business depending on the credit cycle.
Strong 2025 Results Show Momentum
In 2025, both sides of the business performed well. Fee-based loan originations grew 33% for the year. In the fourth quarter alone, LendingClub originated $2.6 billion of loans, up 40% from the year-earlier period. On the banking side, the company’s net interest margin expanded to 5.98% from 5.42%.
Overall, last year was a standout. Total net revenue climbed 27% to $999 million while net income more than doubled to $136 million from $51 million. Diluted earnings per share rose to $1.18 for the year compared with just $0.46 in 2024.
Although not the strongest quarter of the year, the fourth quarter showed continued progress. Net income in the quarter hit $41.6 million, more than quadruple the $9.7 million earned a year earlier. Diluted earnings per share jumped from $0.08 to $0.35, slightly above expectations.
Those results came on a 23% rise in total quarterly net revenue to $266.5 million. Return on tangible common equity was a solid 11.9%. Management also highlighted that the company’s loan performance was running more than 40% better than competitors.
Leadership Changes and Strategic Expansion
Other moves suggest the company is either confident in its momentum or trying to accelerate it. A few days before its earnings release, LendingClub said John C. (Hans) Morris would be replaced as chairman by Timothy J. Mayopoulos, former CEO of Fannie Mae and former president of fintech company Blend, effective April 1. The company’s chief risk officer has also resigned.
LendingClub has signaled a bump in marketing spend for the first quarter and increased use of artificial intelligence in its lending business. The company also plans to enter the home-improvement financing market.
For this year, management guidance calls for originations of $11.6 billion to $12.6 billion and adjusted EPS of $1.65–$1.80.
Market Skepticism Clouds the Outlook
Even with strong quarterly and annual results, investors remain wary. LendingClub shares dropped roughly 20% after the earnings release. Part of the concern focused on softer near-term growth and the company’s shift to fair-value accounting, which can make earnings more volatile as assets are marked to market.
The negative reaction highlights market skepticism toward consumer-credit lenders. LendingClub's stock is well below its IPO highs and the 2021 rebound above $45 per share; neither net income nor revenue have returned to 2022 levels.
Valuation Looks Disconnected From Growth Profile
Analysts are mixed. Of the 10 analysts setting 12-month price targets, six rate the company a Buy and four a Hold. Zacks Research recently downgraded the stock to a Hold from Strong Buy, while JPMorgan (NYSE: JPM) raised its targets.
Overall, the stock is listed as a Moderate Buy, with an average target of $22 per share—more than a 50% upside from current levels. Although down about 25% year-to-date, shares are roughly 33% higher than a year ago.
At a current price around $14, LendingClub trades at roughly 8–9 times 2026 earnings guidance and only slightly above its tangible book value. Those multiples are more typical of a struggling regional bank than a growing digital lender.
Credit Risk and Competition Remain Key Overhangs
For investors, LendingClub is an attractive story—but one whose outcome is still uncertain. The company historically targets prime and near-prime borrowers; a rise in unemployment or a recession could quickly compress margins and income. Competition from large banks and other digital lenders adds further pressure.
For growth-oriented investors comfortable with credit-cycle risk, the setup is compelling: LendingClub is delivering double-digit returns on equity, growing revenue and increasing earnings.
Still, the ifs remain. If the economy holds and the company’s net interest margin, charge-off rates and originations remain strong, LendingClub could be one of the more overlooked opportunities in the financial sector this year.
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