XLF, the financial sector fund, has gathered $1.2 billion of inflows so far in July. XLY, the consumer discretionary ETF, has pulled in $984 million, according to IndexUniverse data.
Interest-rate-sensitive sectors such as consumer discretionary and financials have historically outperformed the market in the early phase of the business cycle, according to Fidelity Investments.
“These sectors have performed well partly due to industries within the sectors that typically benefit from increased borrowing, which includes consumer finance in financials and consumer-linked industries such as autos and household durables in consumer discretionary,” Fidelity notes. [Consumer ETFs Outperforming as Spending Closely Linked to Income]
Within the financial sector, SPDR S&P Regional Banking (NYSEArca: KRE) has experienced inflows of more than $300 million this month. The ETF is seen as a play on rising interest rates and a steepening yield curve. [Regional Bank ETFs in Focus on Higher Rates]
Full disclosure: Tom Lydon’s clients own IWM.