With the first half of 2025 drawing to a close, asset allocators are assessing ideas and strategies for the final six months of the year. Regarding sector-level considerations, financial services merits consideration. As of June 24, the S&P 500 Financial Services Index was beating the broader gauge by 330 basis points on a YTD basis. That confirms strength in the S&P 500’s second-largest sector weight. Some experts see more of the same coming the second half of the year. That potentially signals opportunity with ETFs such as the Invesco S&P 500 Equal Weight Financials ETF (RSPF ).
At Morgan Stanley’s U.S. Financials Conference, which took place earlier last month in New York, high-ranking executives from the sector sounded optimistic tones on what could be in store in the back half of 2025. Should those positive views prove accurate, the $311.1 million RSPF, which is home to 74 stocks, could be a prime beneficiary.
Wall Street, Stress Test Results Could Lift RSPF
RSPF could have multiple second half tailwinds. One catalyst could be a rebound in initial public offerings (IPO) and mergers and acquisitions activity. Executives discussed those possibilities at the Morgan Stanley conference. Resurgences on those fronts would be material for RSPF. That’s because the ETF allocates more than a third of its weight to capital markets stocks.
Second, the 2025 edition of the Federal Reserve stress test is expected to be easier than previous iterations. The results are expected to be released on June 27. Analysts are expecting that could lead to a spate of dividend increases across the sector, including by some RSPF member firms. That could stoke renewed interest in bank stocks and ETFs such as RSPF. That’s because the financial services sector lost some of its dividend allure following the global financial crisis.
Another tailwind for some RSPF holdings — namely money center banks — is that despite what’s been a challenging macroeconomic environment this year, consumer spending is steady and credit card balances are showing signs of sturdiness.
Discretionary Spending Holding Up
“Even though consumers are not expressing much optimism about the economic outlook, discretionary spending is still holding up, and such metrics as average balances and credit are pointing to financial strength,” according to Morgan Stanley.
A more favorable regulatory climate, including related implications for cryptocurrency, could also be an assist for RSPF as 2025 moves along.
“Crypto is one of the areas benefiting from the administration’s new focus on regulation. With the development of a regulatory framework for this asset class, the financial industry is progressively incorporating digital assets into their portfolio of services, including brokerage and custody. Major asset managers are already offering such products as crypto ETFs,” added Morgan Stanley.
Coinbase (COIN) and some issuers of spot bitcoin ETFs are among RSPF’s holdings.
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