Is it Time to Leap Back to U.S. Financials After October?

Major indexes in the United States have had a lukewarm start to November, and investors will be holding their breaths ahead of a major election tomorrow.

Historically, stocks have broadly gained momentum in the aftermath of the midterms.

U.S. Financials took a big hit in the month of October, which was one of the most turbulent months on record since the financial crisis. Banks are gearing up to release the last batch of earnings in the coming months.

A new survey compiled by the Institute for Supply Management fell to 60.3 last month but this was only marginally behind the 21-year high of 61.6 reported in September. The report surveys executives as service-oriented companies like banks, hotels, and hospitals.

Investors should consider the iShares US Financials ETF (NYSE:IYF) in light of this positive report and ahead of the next earnings season. The ETF was up 1.16% in early afternoon trading on November 4 and shares are up 1.6% year over year.

Some of its top holdings include Berkshire Hathaway Inc. (NYSE: BRK.A) JPMorgan Chase & Co. (NYSE: JPM), and Bank of America (NYSE: BAC). U.S. financial institutions have reported record earnings on the back of the U.S. Tax Cuts and Jobs Act. Commercial banks reported record profits in the second quarter of 2018.

The ETF slipped over 4% in the month of October, meaning it could come at a discount for investors in early November.