ETFOctober 9, 2026

ETFriday: Banks Hit 8% Yields While Italy Reclaims the Top Spot

Top 5 Pixie Picks

This Week's Setup

Italy reclaims Pixie Rank 1 with a 6.8 percent earnings yield, a 260-basis-point spread over the S&P 500 CAPE-implied return, while banks and small-caps fill six of the top eight positions with yields between 5.4 and 8 percent.

Regional bank KRE and national bank KBE post earnings yields above 8 percent despite drawdowns near 11 percent, the widest yield spreads to the 10Y in this week's cohort.

The Fear & Greed Index sits at 43, inside fear territory but well off the extremes that marked the prior two weeks, while the S&P 500 CAPE holds at 38.9.

Quick Scan

#	Ticker	One-line thesis
1	EWI	Italy earns 6.8% with 24% three-year return
2	IJR	Small-cap core at 5.4% yield, 14% drawdown
3	VBR	Small-cap value at 5.6% yield, 7% drawdown
4	EWP	Spain yields 6.6%, 30% three-year return
5	KBE	Bank basket at 8% yield, 12% drawdown
6	KRE	Regional banks at 8% yield, 11% drawdown
7	XLF	Broad financials at 6% yield, flat year
8	AVEM	Emerging markets at 6.1% yield, 22% return

The 8 Names

1. iShares MSCI Italy ETF (EWI)

3y annualized return: 23.8% | Life annualized return: 5.8% | 52w drawdown: -12.3%

The earnings yield of 6.8 percent delivers a 154-basis-point spread over the 10Y, the tightest margin in this week's top eight but still 260 basis points above the S&P 500 CAPE-implied return, while the P/E of 14.8 sits 40 percent below the broad U.S. index.

The 12-month total return of 7 percent lags Spain's 17 percent and the small-cap value cohort by 400 basis points, despite a comparable three-year run rate.

Monte dei Paschi surfaces in the news feed with a "renaissance plot twist," a development that historically signals either a capital-structure overhaul or a strategic acquirer entering the picture.

2. iShares Core S&P Small-Cap ETF (IJR)

3y annualized return: 14.3% | Life annualized return: 10.5% | 52w drawdown: -9.1%

The 5.4 percent earnings yield represents a 15-basis-point spread over the 10Y, the narrowest cushion in the top eight, but the 9 percent drawdown is the shallowest outside of VBR, leaving room for multiple expansion if sentiment shifts.

Jennison's PJSM arrives with "almost no track record to back it up," a reminder that capital is rotating into small-cap exposure without waiting for performance validation, a dynamic that tends to precede crowded exits when consensus cracks.

The Zacks and Motley Fool pieces frame IJR as a comparative anchor against SPSM, a sign that the press is positioning small-cap as a tactical trade rather than a long-cycle hold.

3. Vanguard Small-Cap Value ETF (VBR)

3y annualized return: 14.6% | Life annualized return: 9.7% | 52w drawdown: -7.4%

The 5.6 percent earnings yield carries a 32-basis-point spread over the 10Y, tighter than the bank cohort but paired with a 7 percent drawdown, the shallowest in the entire top eight, which signals resilience rather than distress.

The 1.3 percent dividend yield is 40 basis points below IJR's 0.9 percent and 20 basis points below EWI's 1.2 percent, a structural headwind in an environment where yield-starved capital is rotating into higher-payout exposures.

The P/B of 2.36 is the second-highest in this week's cohort after EWP's 2.12, a multiple that typically requires sustained earnings growth to justify, a path that small-cap value has not historically delivered in three-year windows.

4. iShares MSCI Spain ETF (EWP)

3y annualized return: 29.7% | Life annualized return: 3.9% | 52w drawdown: -8.9%

The 6.6 percent earnings yield posts a 137-basis-point spread over the 10Y, the second-widest margin in the European cohort, while the 17 percent 12-month return leads every name in the top eight except AVEM's 22 percent.

The life annualized return of 3.9 percent is the weakest in the entire list, 590 basis points below IJR's 10.5 percent and 200 basis points below Italy's 5.8 percent, a long-horizon drag that reflects Spain's structural growth ceiling relative to its peers.

The P/B of 2.12 is the highest in the cohort, a multiple that typically requires margin expansion or revenue acceleration to sustain, neither of which is visible in the aggregate eurozone data.

5. SPDR S&P Bank ETF (KBE)

3y annualized return: 21.3% | Life annualized return: 8.7% | 52w drawdown: -11.8%

The 8 percent earnings yield delivers a 280-basis-point spread over the 10Y, the widest margin in the entire top eight, while the P/E of 12.5 sits 25 percent below the S&P 500 index and 33 percent below the small-cap cohort.

Barron's frames bank stocks as "beaten down" with a "case for buying now," a phrase that typically appears near sentiment troughs, while the etf.com piece positions banks as an earnings-season watchlist item, signaling that Q3 results will set the near-term direction.

The 24/7 Wall St. piece notes that FAZ, the triple-inverse bank ETF, is "actually shorting insurers and brokers," a structural quirk that suggests volatility in the financial sector is not evenly distributed across banks, a risk that KBE's broad basket cannot sidestep.

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6. SPDR S&P Regional Banking ETF (KRE)

3y annualized return: 20.0% | Life annualized return: 8.6% | 52w drawdown: -11.2%

The 8.1 percent earnings yield is the highest in the entire top eight, delivering a 282-basis-point spread over the 10Y, while the 10 percent 12-month return outpaces KBE's 7.6 percent despite a comparable drawdown profile.

The 24/7 Wall St. piece recalls KRE's 36 percent five-week drawdown in 2023, a historical reference that serves as a volatility reminder rather than a catalyst, while the Zacks coverage positions the fund as a speculative hold rather than a core allocation.

The news feed includes a piece titled "Skip the Regional Bank Basket," a direct shot at the premise that diversified regional exposure smooths idiosyncratic risk, a thesis that broke during the 2023 liquidity crisis and may break again if rate-hike expectations shift.

7. Financial Select Sector SPDR Fund (XLF)

3y annualized return: 18.5% | Life annualized return: 12.0% | 52w drawdown: -7.5%

The 6 percent earnings yield carries an 80-basis-point spread over the 10Y, half the margin of the bank-focused KBE and KRE but paired with a 7.5 percent drawdown, 400 basis points shallower than the regional cohort.

The 1.3 percent 12-month return is the weakest in the top eight, 580 basis points behind IJR's 14.9 percent and 1,400 basis points behind AVEM's 21.6 percent, a lag that reflects the diversified financial basket's inability to capture the earnings leverage that pure-play bank exposure delivers.

The MT Newswires headlines note financials "advancing premarket" and "late afternoon," a pattern that suggests intraday volatility rather than a sustained directional move, a setup that typically precedes range-bound consolidation.

8. Avantis Emerging Markets ETF (AVEM)

3y annualized return: 21.7% | Life annualized return: 9.3% | 52w drawdown: -7.8%

The 6.1 percent earnings yield posts an 85-basis-point spread over the 10Y, while the 22 percent 12-month return leads the entire top eight, outpacing Spain's 17 percent and IJR's 15 percent by 500 and 700 basis points, respectively.

The P/E of 16.5 sits in line with XLF's 16.6 and above the bank cohort's 12.4 to 12.5 range, a multiple that leaves less room for valuation re-rating if earnings growth decelerates or currency headwinds intensify.

The Zacks piece asks "Should You Add Emerging Market ETFs to Your Portfolio Now?", a framing that typically surfaces when flows are already moving, a lagging indicator that suggests the tactical entry window may have closed.

What to Watch

Q3 bank earnings begin rolling in over the next two weeks; the etf.com piece flags financials as a sector watchlist item, and results from the top five KBE and KRE holdings will set the tone for the rest of the cohort.
Monte dei Paschi developments in Italy; the "renaissance plot twist" language suggests a capital event or strategic transaction is in motion, a catalyst that could move EWI's index-weighted position in either direction.
Emerging market currency moves against the dollar; AVEM's 22 percent 12-month return assumes stable or weakening dollar conditions, and any reversal would compress the earnings yield spread and pressure the fund's relative performance.
Small-cap rotation signals from institutional flows; Jennison's PJSM launch and the Motley Fool/Zacks comparative coverage suggest capital is entering the asset class without waiting for validation, a dynamic that tends to accelerate quickly in both directions.

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