Financial reform took one step forward on Wednesday, when the House agreed to pass a new bill that would rewrite the nation’s financial regulations. The bill still needs to pass through the Senate. But assuming financial regulation does get an overhaul, what can we expect from financial exchange traded funds (ETFs)?
According to Damian Paletta and Greg Hitt of The Wall Street Journal, the focus now shifts to the Senate, where doubts linger about whether Democrats will get enough support to pass the bill.
In the House, the bill was approved 237-192, with three Republicans joining the Democrats and 19 Democrats joining the Republicans. Potentially, key Republican support was fostered in the Senate after Democrats removed the $19 billion tax on large financial institutions. [Financial ETFs Wait…and Wait.]
One potential (and key) Republican supporter is Senator Susan Collins, who said she was “inclined to support” the bill, after the Democrats removed the $19 billion tax.
If you’re looking to make a play on the whole financial overhaul situation, you may want to take a long look at these ETFs, highlighted by ETF Base. [What Reform Means For ETFs.]
Financial Select Sector SPDR (NYSEArca: XLF): This would be a straight bullish play on financial regulation. “The thinking here is that FinReg is in fact toothless and the large will continue to get larger while pushing out smaller banks.”
SPDR KBW Regional Banking (NYSEArca: KRE): This would be a play on small regional banks, with the idea that these banks have been unjustifiably sold off with the larger financial institutions. To hedge your bets, you could make a long KRE/short XLF play.
Direxion Daily Financial Bull 3X Shares (NYSEArca: FAS): This would be a leveraged bullish play. The fund’s top holdings are similar to XLF’s, but returns will be goosed 3x. [Our Guide to Leveraged and Inverse ETFs.]
There are more financial ETFs than these three out there, though. You can locate other financial ETFs by visiting our ETF Analyzer and typing “financial” or “bank” to get a list of other financial sector ETFs. Our Analyzer will also allow you to see which ETFs are above their trend lines and other key information that will help you decide where to be.
For more stories about big banks and the financial sector, visit our financial category.
Sumin Kim contributed to this article.