The financial press is humming over what President Barack Obama’s call for greater financial regulation and the SEC’s investigation into subprime mortgage deals will mean for the financial sector and its related stocks and exchange traded funds (ETFs). Some experts believe tighter financial oversight shouldn’t have a negative effect on the sector. Why?
According to Sam Mamudi of MarketWatch, analysts and experts give a few reasons why financial overhaul shouldn’t hurt the financial sector.
- Regulation is largely aimed at the larger banks, so the sector as a whole shouldn’t be affected.
- Some analysts believe investors are already discounting for tighter regulation, meaning any concrete developments in this uncertain situation should bring a relief rally. [Looking Under the Hood of Financial ETFs.]
- Regulation should help the larger banks stabilize earnings and avoid another financial crisis.
- De-regulation hasn’t been the boon that many assume it to have been for financial stocks. Over 10 years, J.P. Morgan (NYSE: JPM) is about even, Citigroup (NYSE: C) is down 90% and Goldman Sachs (NYSE: GS) is up only 60%. [Regional Bank ETFs Are Riding High.]
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- SPDR KBW Bank (NYSEArca: KBE) should be in the limelight in regards to financial oversight. Bank of America, Citigroup and Wells Fargo are 10%, 7.8% and 7.4% percent of holdings.
- SPDR KBW Regional Banking (NYSEArca: KRE) shouldn’t be heavily affected by financial oversight, according to some analysts.
- Financial Select Sector SPDR (NYSEArca: XLF) should be in the limelight in regards to financial oversight. Bank of America, JP Morgan and Wells Fargo are 10.1%, 9.8% and 9.5% percent of holdings.
Sumin Kim contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.