A couple of months ago, an opportunity for U.S. financials (NYSEARCA:XLF) to outperform some non-financial sectors had emerged due to the Fed's tug-of-war on interest rates; a market scenario which actually came true. The expectations for higher interest rates in the U.S., as a reaction to the improving global macro fundamentals, have been the driving force behind this outperformance. This made investors expect a recovery of net interest margins, which are the "oxygen" of banks, from their historically low levels. Since the outperformance trend of financials versus defensives has already covered some ground since its inception, it is very critical to ask if this trend has more "fuel" to "burn." Judging from the looks of the current macroeconomic and technical dynamics this trend seems capable to extend itself, unless of course an unpredictable exogenous shock abruptly deflates the global economy.
Synthetic Trade Performance
The trade opportunity discussed in…