Regional Banks’ Torrid Rally Draws Bearish Bets as Earnings Loom

A breakout rally in the shares of US regional banks may be setting investors up for disappointment, according to some Wall Street strategists, who recommend betting on a pullback in the sector as earnings season gets underway.

The SPDR S&P Regional Banking ETF (KRE), an exchange-traded fund that tracks the performance of Main Street lenders, is up more than 8% over the last month, nearly double the S&P 500 Index’s gains over the same period. Tailwinds for the sector include the prospects of an M&A boom, an easier regulatory environment and expectations of higher-for-longer interest rates.