Barclays this week propelled its view on the Financials (NYSEARCA:XLF) sector, setting its sights partially on what’s considered to be a looser regulatory environment in Washington.

Barclays upgraded Financials (NYSEARCA:XLF) to positive from neutral, calling it its preferred cyclical sector in its base-case scenario of a slowing macro landscape and gradual valuation recovery. This week, Barclays sliced its S&P 500 (SP500) year-end target to 5,900 from 6,600, citing the potential blow from U.S. tariff policy on the U.S. economy as reason for the downgrade.

The S&P 500 Financial sector (XLF) is up 3.9% YTD, the third-best performing S&P 500 (SP500) group in 2025. Lower rates and “wobbly macro are risks” but the group should “benefit as U.S. policy focus eventually shifts away from trade (and potentially to deregulation), with calmer capital markets providing a more constructive backdrop for M&A/deal activity,” Venu Krishna, Barclays’ head of U.S. equity research, said. 

The Financials sector’s NTM P/E of 16.5X is “compelling” and if heavyweight Berkshire Hathaway (NYSE:BRK.B) were stripped out, the sector would be trading 0.5x-1x cheaper and at a wider discount to the S&P 500 (SP500) than the historical median, the researchers said. 

Financials delivered “standout beat-and-raise through the 4Q24 earnings season” led by the sub-industries of Transactions/Payment Processing, Banks and Capital Markets, Barclays said. 

The Financial Select Sector SPDR Fund (XLF) is the largest financial-sector ETF, with +$52B AUM. Below are its 10 largest holdings, along with Seeking Alpha’s Quant Ratings. SA’s Quant Ratings are given on a scale from one to five, with any rating of 3.5 or above considered a bullish rating. The XLF ETF (XLF) itself has a 4.36 SA Quant Rating. 

• Berkshire Hathaway (NYSE:BRK.B): YTD move: +16.1%. SA QR: 4.91
• JPMorgan Chase (NYSE:JPM): YTD move: +1.4%. SA QR: 3.46
• Visa (NYSE:V): YTD move: +10.8%. SA QR: 3.48
• Mastercard (NYSE:MA): YTD move: +5.4%. SA QR: 3.31
• Bank of America (NYSE:BAC): YTD move: -6.2%. SA QR: 3.35
• Wells Fargo (NYSE:WFC): YTD move: +0.7%. SA QR: 4.91
• Goldman Sachs (NYSE:GS): YTD move: -2.6%. SA QR: 3.42
• Progressive (PGR): YTD move: +15.4%. SA QR: 4.94
• S&P Global (NYSE:SPGI): YTD move: +1.8%. SA QR: 3.37
• American Express (AXP): YTD move: -9.4%. SA QR: 3.38

Here are some other Financial sector ETFs: (VFH), (IYF), (FNCL), (IYG), and (FXO).