SUPERNEWS

Macro

Bank ETFs KRE & KBE Signal Breakout, Up 44% & 51% from 2023 Lows

Bank stocks signal breakout with JPMorgan's lead, KRE and KBE outperform S&P 500, eyeing continued growth amid rising interest rates.

By Bill Bullington

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5/8, 14:48 EDT
S&P 500
iShares 20+ Year Treasury Bond ETF
iShares 7-10 Year Treasury Bond ETF
JP Morgan Chase & Co.
SPDR S&P Regional Banking ETF
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Key Takeaway

  • KRE and KBE ETFs, up +44% and +51% from 2023 lows, are forming bullish patterns suggesting potential breakouts.
  • Both ETFs outperformed the S&P 500 since their spring 2023 lows but lag its +8.2% YTD gain in 2024.
  • Interest rates' rise correlates with bank ETFs' rallies; their charts indicate the continuation of a comeback story.

Bank Stocks Eyeing Breakout

Bank stocks have shown resilience and are hinting at a potential breakout, with JPMorgan leading the charge back to its former glory, while others are still catching up. The SPDR S&P Regional Banking ETF (KRE) and the SPDR S&P Bank ETF (KBE) have both significantly outperformed the S&P 500 since their lows in 2023, with KRE up by 44% and KBE by 51%. Despite their year-to-date lag behind the S&P 500 in 2024, both ETFs are showing bullish patterns on their charts, suggesting a continuation of their comeback story.

ETFs' Comparative Analysis

KRE and KBE, while similar, have distinct differences that cater to varied investor needs. KRE, with its focus solely on regional banks, offers more liquidity with an average daily volume of nearly 14 million shares. KBE, on the other hand, includes both regional and major money center banks, boasting a significantly higher average market cap, thanks in part to holding giants like JPMorgan. These differences underline the importance of understanding each ETF's composition and market position before making investment decisions.

Bullish Patterns and Interest Rates

Both KRE and KBE are consolidating above their rising 200-day moving averages, with KBE testing its late 2023 highs and KRE nearing a breakout from a bullish formation. This positive momentum is further supported by the historical correlation between bank ETFs and interest rates. As rates have risen, so have KBE and KRE, following key lows in late 2022 and throughout 2023. This trend underscores the significant impact of interest rates on bank stocks' performance and their potential for continued growth.

European Banks and Share Buybacks

In Europe, the trend of share buybacks among banks is showing signs of peaking, with €15.4 billion earmarked for 2024, down from €21.2 billion in 2023. This shift reflects rising valuations and a strategic pivot towards other capital deployment methods, including mergers and acquisitions. High interest rates are dampening loan demand, prompting banks to explore alternative avenues for utilizing excess capital. This strategic shift could herald a new phase of growth and consolidation in the European banking sector.

Street Views

  • Frank Cappelleri, Founder of https://cappthesis.com (Bullish on bank ETFs KRE and KBE):

    "Now that we understand what’s behind both ETFs, let’s talk about the charts. The bottom line is that both KRE and KBE have been forming bullish patterns, and we could see breakout attempts soon... Both KBE and KRE have been consolidating their rising 200-day moving averages."