Financials are the standout sector today, with every subgroup moving higher. This is not surprising given the negative correlation between Financials and other sectors such as Tech and AI. In a market where Tech is broadly lower, Financials are outperforming. However, it’s worth noting that flows in Financials remain skewed to the sell side, with real money selling into strength.

The team at UBS notes that there has been some covering in certain subsectors within Financials, such as alternatives (Alts) and consumer finance. Blackstone (BX) is leading Alts higher after redemption requests for Blackstone Credit (BCRED) came in at 10% versus the 5% cap – better than feared following the Clearwater update on Tuesday. While there is broad covering across Alts, there remains a notable lack of long only interest in the group.

Investors continue to favor consensus longs within Financials, with money hiding in Citigroup, Goldman Sachs, Morgan Stanley, and the trust banks. Despite the outsized moves in the sector today, volumes in small- and mid-cap (smid cap) banks, insurance, information services, fintech, BDCs, and consumer finance remain subdued. This suggests a lack of broad sponsorship across the group.

Looking ahead, the performance of Financials will depend on several factors. Firstly, the ongoing impact of the COVID-19 pandemic on global economies and financial markets cannot be ignored. Secondly, the US Federal Reserve’s monetary policy decisions and interest rate movements will continue to influence the sector. Finally, geopolitical tensions and trade wars could also have an impact on Financials.