Energy led the S&P 500 Index (^SPX) sectors last week. But financials also rose 0.9%, extending their 11-week winning streak. We turned constructive on the group in April, observes Ed Yardeni, editor of Yardeni QuickTakes.
Financials had the worst year-to-date performance back then. But the sector is now up 6% YTD – and at a record high. Among its component industries, Life & Health Insurance (up 17.3%) and Investment Banking & Brokerage (14.7%) lead the YTD rally. Financial Exchanges & Data is down 7.9% YTD.
(Editor’s Note: Ed will be speaking at the 2026 MoneyShow Masters Symposium San Francisco, scheduled for Aug. 25-28. Click HERE to register.)
The sector's forward revenues and forward earnings are both at record highs. We think AI is a key contributor to the sector's significant increase in the forward profit margin, from around 18% in early 2024 to a record 22.1% currently.
Meanwhile, the AI trade has spread to Financials. Nvidia Corp. (NVDA) announced partnerships on Aug. 10 with Apollo Global Management Inc. (APO), BlackRock Inc. (BLK), Blackstone Inc. (BX), Brookfield Corp. (BN), Goldman Sachs Group Inc. (GS), and KKR & Co. (KKR) to mobilize over $500 billion of third-party capital to expand AI compute infrastructure.
Five of the six are in the S&P 500 financials sector. Analysts expect the Investment Banking & Brokerage industry’s earnings to grow 30.7% this year and Asset Management & Custody Banks’ earnings to grow 19.8%, compared with 14.7% for the sector as a whole.
