The financial sector is a deep and varied ecosystem, and while crypto often captures the headline buzz, the core of the sector—banks, insurers, asset managers, exchanges, and payment infrastructure—has seen its own share of rallies across different economic cycles. Stripping out the crypto noise, we’re left with traditional finance and its modern extensions, and the potential for a rally in these areas is closely linked to interest rate trends, credit cycles, technological modernization, and regulatory shifts.
Historically, one of the clearest financial rallies came in the aftermath of the 2008–2009 Global Financial Crisis, when large U.S. banks like JPMorgan, Bank of America, and Goldman Sachs staged powerful recoveries from depressed valuations. This rally was aided by aggressive Federal Reserve policy, bank recapitalizations, and eventually rising yields, which widened net interest margins. From 2010 to 2015, financials moved from distressed to respectable, though shadowed by regulation and cautious lending.
A more subtle but meaningful rally occurred post-2016, following the Trump election. The prospect of deregulation, tax cuts, and rising interest rates ignited enthusiasm for large-cap financials. Regional banks, insurers, and brokerages rallied sharply on expectations of improved profitability in a reflationary economy. The Financial Select Sector SPDR ETF (XLF) surged alongside broader markets from 2016 into early 2018. Insurers, in particular, benefited from rising rates and growing premiums, while exchanges like CME Group and ICE saw tailwinds from increased trading volumes and volatility.
Another notable rally emerged in 2020–2021, not just as a bounce from COVID lows, but as part of a reopening/reflation trade. Banks benefited from steepening yield curves and loan growth as fiscal stimulus flowed through the system. Mortgage originators, credit card companies, and payments firms like Visa and Mastercard saw record volumes. Even stodgy regional banks outperformed tech briefly in early 2021. SPACs and retail speculation also bolstered exchange revenues. However, this rally lost steam as inflation took hold and the Fed turned hawkish.
Looking forward, the next potential financial rally—excluding crypto—likely hinges on a few structural shifts now beginning to coalesce. First, a peak in interest rates will breathe life back into banks, asset managers, and fintech lenders whose margins have been squeezed by rate volatility. As the Fed transitions from tightening to holding or cutting, steepening yield curves can support bank profitability, and falling mortgage rates could reawaken housing-related finance.
Second, payments and transaction networks—the likes of Visa, Mastercard, and PayPal—could see renewed investor enthusiasm as global spending rebounds and digital wallets go mainstream, especially in emerging markets. While not as flashy as buy-now-pay-later startups, these entrenched players are cash machines with high margins and global moats. Their rally would be one of rediscovery after a period of neglect.
Third, exchanges and market infrastructure (CME, ICE, Nasdaq) are quietly positioned for another leg up if we re-enter a period of heightened trading volume, rate volatility, and alternative asset interest. These businesses thrive on uncertainty and transaction throughput—not direction. With retail trading not dead, and institutional volume rising, they are among the least understood compounders in finance.
Fourth, private credit and alternative lending platforms could be a dark horse. As banks pull back from lending due to capital constraints, non-bank lenders like Ares Capital or Blackstone’s credit arms are stepping in. If defaults stay manageable and spreads remain juicy, this segment could become the bond market’s new growth engine.
Finally, insurance tech and underwriting may surprise. With AI and big data reshaping how risk is priced and policies are sold, some insurers and reinsurers are entering a modernization phase. Names like Lemonade failed to impress in their first act, but legacy players deploying AI at scale—like Progressive or Chubb—could quietly lead a revaluation as loss ratios improve and underwriting tightens.
In sum, the financial sector’s next rally won’t be driven by one tidal wave like crypto or DeFi. It will emerge in pockets—banking from yield curve shifts, payments from consumption rebounds, exchanges from trading flows, private credit from disintermediation, and insurance from algorithmic pricing. None of these have hit a speculative fever yet, which makes their base quietly bullish. The moment the Fed pivots—or even clearly pauses—this sector may finally get its broad rerating.