While people may be alarmed by the struggling energy sector as oil hovers around its historically low prices, the financial sector is being overlooked as a market that has been struggling. Using something called the Financial Select Sector SPDR Trust, we see that the financial sector has in a bit of a hole. The exchange-traded fund tracks the financial stocks that are included in the S&P 500, and it tracked a 19% drop over the past year. Just this year, the average financial stock in the S&P 500 is down 17%. This numbers can be especially worrisome as the financial sector comprises 15% of the total value for the S&P 500.
Global financial instability is a big proponent of rising financial distress in the United States. Bank stocks are falling hard as a result of this, leaving investors worrying if we're going to slip up from our steady recovery from 2008. 2008 showed us that the losses incurred in the financial sector are not merely contained in those markets, but the effects permeate the larger financial health of the nation as a whole.
However, analysts still have confidence in the sector to bounce back, as there is still an estimate for financial sector profits to reach 5.7% in 2016, and an increase in the average financial stock of 31% within 18 months.
Link for the curious: http://www.usatoday.com/story/money/markets/2016/02/15/bank-stocks-take-investors-cleaners/80256146/
I wonder if this will be in discussion among candidates running for the presidency. It's surprising how often the general public can get focused on a few issues, and fail to recognize the many other problems that may be occurring in the economy. I think recognizing some our interdependence on foreign markets is often overlooked. As we have talked about in class, trade makes everyone better off, so political candidates that argue to "keep things domestic"are often pitching their rhetoric to a lot of Americans with no real understanding of how the US economy functions.
ReplyDeleteI agree wth Samuel, trade can help stimulate the economy and as we learned in class sometimes running a trade deficit can have a positive effect, where it can help with economic development in the way of financing a high level of investment with foreign burrowing.
ReplyDeleteThere are consequences and benefits to every economic decision to be made. In this situation, I agree that too many people may be focused on cutting taxes and things of that nature, but what about our foreign market competitiveness. Going off what Sam said, trade really does make everyone better off and I believe that keeping things domestic is unrealistic. People also do not realize that while we may not export many products, we do export a significant level of services to the world. I guess you can call these "domestically" produced services.
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