The SPDR S&P Regional Banking ETF (KRE) is making a remarkable recovery after a challenging period in 2023. July shows promising signs for the ETF, with the potential for its most substantial monthly gain since 2016.
Data from FactSet reveals that KRE shares have already surged by 18.6% this month, following a 4.8% increase in June. According to Dow Jones Market Data, the fund is on track to achieve its best monthly performance since November 2016.
Earlier this year, regional bank stocks faced significant turmoil caused by the sudden collapse of Silicon Valley Bank. This event led to concerns about possible bank runs across the regional banking system. However, in March, the Federal Reserve swiftly intervened with an emergency lending program to alleviate these fears.
The Fed’s program was successful in restoring confidence in the banking system, providing additional funding to ensure banks could fulfill all their depositors’ needs. Despite experiencing a steep drop of almost 29% in March, the SPDR S&P Regional Banking ETF gradually started to recover in June.
The resilience and strengthening of regional bank stocks indicate a restored sense of stability and investor confidence in the sector.
The Recovery Gains Momentum
The recovery has gained momentum in July following the latest quarterly earnings reports from banks and the ongoing rally of the S&P 500. Notably, the Invesco KBW Bank ETF (KBWB) and the SPDR S&P Bank ETF (KBE) have experienced significant surges this month, providing broad exposure to the U.S. banking market and tracking an equal-weighted index of banking equities, respectively.
However, despite these positive developments, the SPDR S&P Regional Banking ETF and other related funds have yet to recover fully, as they still remain down for the year 2023.
According to FactSet data, the Invesco KBW Bank ETF has plummeted by 11.7% thus far in 2023. Similarly, the SPDR S&P Bank ETF has also suffered a decline of 7.5%, while the SPDR S&P Regional Banking ETF has experienced a significant drop of 17.5%.
Although broader stock market indexes have remained relatively stable on Monday, they are on track to record gains for the month of July. The S&P 500, for instance, is projected to achieve a 3.1% rise in July and has already seen an impressive increase of over 19% year-to-date.
In the meantime, investors are analyzing the findings of the Fed’s senior loan officer opinion survey, which was released at 2 p.m. Eastern Time on Monday. This survey provides valuable insights into lending conditions in the U.S. as well as the demand for loans from households and businesses.