Due to the improvement in performance over the last year, the banking sector is receiving increasing investor attention. S&P Banks Select Industry Index grew 62.1% over the last year, compared to the 35.5% rise in S&P 500 Index.
There are good chances that the Federal Reserve will reduce its monthly bond purchase in the short term. Financial sector will benefit from a looser monetary policy that pushes yields up. Rising rates can boost profits of banks, asset managers, discount brokerage companies and insurance companies. The banks will likely see an increase in the slope of their yield curve, which is the difference between long- and short-term interest rates. The steepening yield curve will likely support net interest income which is a large portion of bank revenues.
Wall Street continues to impress investors, with a strong rally in three of the broader indices during August. Stock markets rallied after the second quarter earnings season produced better than expected results. CNBC reports that the S&P 500 has recorded a 95.4% earnings growth rate, which is the biggest increase in stock market since the fourth quarter 2009.
Pfizer’s coronavirus vaccine Comirnaty (BNT162b) was approved by the FDA. This approval can be used to combat the increasing number of COVID-19 cases. Full FDA approval will increase confidence in imposing vaccination mandates. The unvaccinated are more likely now to choose vaccinations. CNBC reported that three out of 10 adults unvaccinated were more likely than others to be jabbed after a Kaiser Family Foundation poll. Market participants also feel optimistic about the possibility of peaking cases for delta variants.
The U.S. economy should be able to grow with the current health crisis under control, increased vaccinations and faster business reopening, as well as a return to normalcy.
Bank ETFs: Keep Track
Let’s look at some ETFs in banking that could benefit from this current climate.
SPDR S&P Region Banking ETFKRE
It seeks investment returns that, before expenses and fees, correspond to the overall return performance of S&P Regional Banks Select Industry Index. It has AUM of $4.48 billion and charges 0.35% in expense ratio (read: 5 Financial ETFs to Buy on Taper Talks).
SPDR S&P Bank ETFKBE
This fund aims to deliver investment returns that, before expenses and fees, correspond to the overall return performance of S&P Banks Select Industry Index. The fund has an AUM of $3.13 trillion and charges 0.3% in expenses ratio. (Read: Fed Prepares for QE Taper?) You can buy ETFs
Invesco KBW Bank ETFKBWB
This fund uses the KBW Nasdaq Bank Index. The index is a modified-market capitalization-weighted index of companies, primarily engaged in U.S. banking activities. It has AUM of $2.87 billion and charges 0.35% in expense ratio (read: Banking Earnings Decent: Time to Buy Financial ETFs on Value?).
iShares U.S. Regional Banks ETFIAT
This fund will track investment results from an index that consists of U.S. equity in the sector of regional banks. The fund has an AUM of $1.19 Billion and charges 0.4% in expenses ratio.
First Trust Nasdaq Bank ETF FTXO
This fund seeks to invest in results which correspond with the Nasdaq US Smart Banks Index’s price and yield before expenses and fees. This modified index has a factor-weighted structure, and is intended to give exposure to U.S. banks. It has AUM of $227.4 million and charges 0.60% in expense ratio (read: 5 Top-Ranked ETFs That Outperformed in August).
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Publited Fri, 10 Sep 2021 at 03:07:59 +0000