US Financials (IYF) : Bullish reboot?

iShares ETF US Financials - IYF - 24/07/2018

Short Term strategy: Positive (90%) / Trend +
Long Term strategy: Positive (85%) / Trend +

Characteristics of the ETF

The IYF ETF (iShares) created in 05/2000 and listed on the Nyse, reproduces an index based on a selection of 290 US financial stocks. The tracked index is the Dow Jones U.S. Financials Index. This is a very specialized index from a geographical point of view, composed mainly of US stocks and quoted in USD.

The fee for this ETF is 0.44% and the AUM is approximately $ 1976m. The replication method is direct and there is a dividend distribution policy.

Alternative ETFs: XLF (SPDR, in USD), VFH (Vanguard in USD), FNCL (Fidelity in USD)

Index & components

IYF reproduces an index composed of banks, insurance companies and companies specializing in banking transactions.

The top 10 holdings account for about 40% of the index and are among the world's largest financial companies, such as Warren Buffet's Berkshire Hathaway, as well as the prestigious JP Morgan, Goldman Sachs and Citibank banks. but also companies like Visa and Mastercard specialized in bank cards.

So it's a very deep index, diversified from a business point of view, but with a US origin even though some of these companies have global operations, so it's basically a dollar exposure.

We believe that this ETF is interesting because of the quality of the companies that make it up, its depth and the diversification offered within the financial universe that goes well beyond a banking index. Since its creation in May 2000, the IYF ETF has achieved a cumulative performance of 130% (Net Return) which is not negligible if we take into account that this sector went through the financial crisis of 2007-2008, the most significant since the Great Depression of 1929.

There is some volatility inherent in the financial companies that has not abated since the end of the subprime crisis. Financial companies are companies that are very sensitive to macroeconomics, they are specific cyclicals whose profits vary according to the interest rate curve, the economic situation which conditions the rise of risks and, of course, the behavior of investors and financial markets. Because of their importance in the economic system, financial companies are subject to more or less strict regulations depending on the period, which also affects the return on equity.

Financials are volatile and operate from a global point of view, which means that they are potentially sensitive to a particular problem in a given region (bankruptcy of a country, a hedge fund, monetary or political crisis).

US financials currently benefit from a promise of deregulation that would be very favorable to banking activities and the rise in markets that has a positive impact on trading activities. Large US banks are now allowed to increase dividends or buy back shares, while the administration plans to relax the rules put in place from 2010 to better regulate banks and avoid risk taking excessive.

A positive news feed (at least in the short term) for the sector.


Latest developments

IYF is up slightly by 2% YTD,  after rising by 17.7% in 2017, slightly lower than the S & P500 (+ 19.4%).

The US banking sector remains in a positive context of strong economic growth and rising long-term rates. The latter remain in the 3% zone while the markets still seem to favor an inflationary impact of D.Trump's actions, in particular the fiscal plan, which aims to lower corporate income tax from 35% to about 20%, but also the current trade war that could lead to higher prices for the American consumer in the first place but would be deflationary in case of recession.

Monthly data

The monthly chart shows a bullish trend that marks a strong rebound on the EMA13 which forms a bullish engulfing, a very positive pattern. This bullish figure implies an end to the active correction since the January highs. The bullish engulfing should be a new wave of medium / long-term growth.


Weekly data

On the weekly chart, we can see a bullish attack that seems to mark the recovery of the main (bullish) trend. Prices are breaking the bearish line, while the MACD is showing signs of bullish reversal. If the breakdown of $ 122 is confirmed, the index should move towards the peak of the year, ie $ 127.

ETF Objective

IYF is an ETF listed in USD, which seeks to replicate the Dow Jones U.S. Financials Index (287 US companies)


Inception date 22/05/2000
Expense ratio 0,44%
Issuer iShares
Benchmark DJ US Financials index
Ticker IYF
ISIN US4642877884
Currency $
Exchange NYSE
Assets Under Management 1 938 M$
Dividend Distribution
Currency Risk No
Number of Holdings 287
Risk 4/5

Country Breakdown

USA 100%

Sector Breakdown

Banks 32%
Diversified Financials 27%
Real Estate 18%
Insurance 13%
Software & services 8%

Top Ten Holdings

Berkshire Hathaway 7%
JP Morgan Chase & Co 7%
Bank of America 5%
Wells Fargo 5%
Visa Group 5%
Mastercard Inc. 4%
Citigroup  3%
Goldman Sachs 2%
US Bancorp 2%
American Express 1%