About a month ago, we analyzed the financial sector where individual banks were considered for investment. This time, we are back to this sector again, since in the current conditions it cannot be ignored. This time, however, we are going to analyze ETFs that include financial sector papers.
When analyzing the S&P 500, there are doubts about its further growth, unless there’s a correction towards 2,400. But in order for such a correction to take place, some significant event must occur that will scare off investors and force them close their positions for a while, locking in profits. The S&P 500 reacts sensitively to the presidential elections and programs adopted by new US leaders.
For example, Barack Obama took over as president during the mortgage crisis, and he had to solve the problems of growing debt, which later exceeded 100% of GDP, and look for new ways to develop the economy after massive bankruptcies of companies. At that time, the S&P 500 lost 67% in 18 months and reached its 2002 lows, which was the result of the dotcom crisis. Later, however, Obama’s administration managed to find a solution by quantitative easing stimulus. The conditions for regulating the financial market, the crisis driver, were tightened, the financial service users protection was strengthened, and measures to reduce taxes, taken under Bush Jr., were prolonged.
As a result, investors calmed down, unemployment began to gradually decline, and the S&P 500 went up to conquer new highs, which continued throughout the 8 years of Barack Obama’s leadership. The only significant correction occurred a year before the start of Obama’s second term, as investors might have decided to hedge and cash off. Nevertheless, once it became clear that Barack Obama would step in for a second term, the S&P 500 rally continued.