A sector subset of the S&P 500, the S&P 500 Financials index represents the performance of companies within the financials sector. According to S&P Global, it “comprises those companies included in the S&P 500 that are classified as members of the GICS financials sector.”
S&P 500 Financials Index, Price & Chart
The index includes companies involved in a wide range of financial activities, such as banking, insurance, investment management, and credit services. These businesses are essential to the economy, providing capital, liquidity, and financial intermediation.
Financials are viewed as a cyclical sector, meaning their performance is closely tied to the overall health of the economy. They are influenced by macroeconomic or systematic shifts in the overall economy.
The index features well-known names such as JPMorgan Chase, Bank of America, and Berkshire Hathaway. There are currently 73 companies in the index.
SP500-40 Index Performance
The S&P 500 Financials index had a stellar 2024, climbing around 28.9%, with the sector ranking as one of the top-performing, riding strong post-election momentum into year-end. It rose throughout most of 2024, only pulling back in December as the Santa Claus rally failed to materialise.
As of early 2025, the index has delivered the following performance:
| Period | Total Return |
|---|---|
| 1-Year Return | +28.43% |
| 3-Year Return | +7.36% |
| 5-Year Return | +9.48% |
| 10-Year Return | +9.21% |
S&P 500 Financials Top 10 Companies
The index is rebalanced quarterly in March, June, September and December. The top 10 constituents make up 54.1% of the index.
| Company | Market Cap |
|---|---|
| Berkshire Hathaway | |
| JP Morgan Chase | |
| Visa | |
| Mastercard | |
| Bank of America | |
| Wells Fargo | |
| American Express | |
| Morgan Stanley | |
| Goldman Sachs | |
| S&P Global |
US Financials Sector Forecast
The Bull Argument: In his outlook for 2025, Matt Reed, a Fidelity Sector Portfolio Manager, said the “fundamentals appear strong” heading into next year. Reed sees the 2024 momentum potentially extending into 2025, “particularly for diversified banks as well as transaction and payment processing firms.” He believes companies in the sector are on sturdy ground, with one of the primary reasons for his bullish view being the steady economic growth for the US. While acknowledging the risks, Reed said he believes “the tailwinds for financial stocks appear stronger” and that with the 2024 US election been and gone, “the likely impact for financials includes a less aggressive regulatory agenda for banks, along with a more conducive backdrop for mergers and acquisitions and other capital-market activities.”
The Bear Argument: Investors should always understand the potential risks to any asset they are interested in. While the outlook for financials may be positive, according to Reed, he notes that a potential decline in net interest margins if rates are cut further is a potential bearish factor. In addition, Reed notes that commercial real estate holdings for some financial firms remain a source of concern for lenders.
Meanwhile, if the US economy weakened, that could also impact the sector, with some banks potentially seeing decreased loan demand and a rise in nonperforming loans.
Our View: While the sector’s performance can be impacted by various factors, the performance (see above) shows that the financial sector can provide opportunities for long-term growth, particularly during periods of economic expansion. However, investors need to be aware of its cyclical nature and sensitivity to interest rate movements.
Who Should Invest in the S&P 500 Financials?
For those interested in investing in the sector, the iShares S&P 500 Financials Sector UCITS ETF and the SPDR S&P 500 Financials ETF (XLF)are two funds tracking the index.
However, financials ETFs may be more suited to:
Cyclical investors: While there has been steady growth over the years, financials are seen as cyclical stocks. Therefore, they may be better suited to those willing to accept higher volatility in exchange for potential outperformance during economic expansions.
Dividend-focused investors: Many financial companies offer stable and attractive dividend yields, making the sector appealing to income-oriented portfolios.
Long-term growth investors: Investors looking for long-term growth and aiming to capitalise on the sector’s potential during periods of rising interest rates or economic growth may want to look further at the ETFs tracking the index.
