Financial stocks are those that make up the financial sector, which encompasses banks, lenders, wire houses, and other companies that facilitate the flow of capital and debt.

Real estate companies can also fall under this category. Financials tend to do well when yield curves are steep and the regulatory environment favors banks. When credit markets aren’t under strain financials tend to perform well.

The Financials sector was one of the biggest to suffer during the financial crisis of 2008, as many big banks collapsed and credit dried up quickly. Financials have been under strain since, as the regulatory environment has instituted new rules on banks and lending/trading practices.

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