Financial exchange traded funds (ETFs) are perched at the top of the charts this week, but it’s not the result of any single big event. Small things, instead, add up.
The top of charts for the last five trading days are dotted with banking funds, including:
- SPDR KBW Bank (NYSEArca: KBE)
- SPDR KBW Regional Bank (NYSEArca: KRE)
- iShares Dow Jones U.S. Regional Banks (NYSEArca: IAT)
- Financial Select Sector SPDR (NYSEArca: XLF)
- iShares Dow Jones U.S. Financial Services (NYSEArca: IYG)
A few things are behind the recent moves:
- The gains in regional banks this week were propelled on hopes that lending will become more profitable as U.S. Treasury yields rise, say Hannah Kuchler and Telis Demos for The Financial Times. [Regional Banks ETFs Get Back In Gear.]
- A narrowing U.S. trade deficit also helped boost financials on Friday.
- Citigroup (NYSE: C) got a boost after the government sold its remaining stake in the bank, easing fears about a “government-run” bank that some say has been holding Citi’s stock back.
- AIG agreed to a restructuring plan and said it would also repay a $20 billion loan from the Federal Reserve.
While many of these funds are well above their 200-day, the sector is still struggling: a high unemployment rate throughout most of the United States is a weak sign. Unemployment may also be a signal that the wave of foreclosures has not yet hit the shore. Any turnaround in these fundamentals could eventually translate to a sustained boost of loan growth for the entire banking sector. [Financial ETFs Wait For Washington’s Reforms.]
If this is an area in which you want to dabble, be sure you’ve got a strategy in place.
Tisha Guerrero 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.