ETF Trends
ETF Trends

Post bank stress tests, U.S. Financials continue to exhibit notable relative strength with benchmark ETF XLF (SPDR Financial Select Sector, Expense Ratio 0.18%) taking in about $1 billion in new assets lately, bringing the total asset base of the fund to about $19 billion.

Top holdings of XLF are of course WFC (8.41%), JPM (8.07%), BRK.B (7.87%), BAC (6.66%), and C (5.57%), with earnings season looming for most of these component stocks (BRK.B on a somewhat unconventional earnings release schedule basically reports mid-quarter).

JPM and WFC are slated to release earnings on 4/11, while C and BAC are scheduled to report on 4/14 and 4/16 respectively. Our eyes are on all related U.S. Financials/Bank ETFs at this point in addition to XLF as well, given that the sector continues to lead in terms of performance.

Two “Bank” specific ETFs have grown to be the second and third largest Financials equity based ETFs in the space currently, KRE (SPDR S&P Regional Banking, Expense Ratio 0.35%) and KBE (SPDR S&P Bank, Expense Ratio 0.35%), with $2.7 and $2.6 billion respectively in assets under management.

Several diversified financials ETFs may also be in play in the short term including VFH (Vanguard Financials, Expense Ratio 0.19%), IYF (iShares Financials, Expense Ratio 0.48%), and FXO (First Trust Financial AlphaDEX, Expense Ratio 0.70%).

Not all financials based equity ETFs are participating in the recent rally in the sector however, as we note that several internationally based financials funds which are likely lesser known, are taking it on the chin year to date, namely FEFN (iShares MSCI Far East Financials Sector, Expense Ratio 0.48%) and CHIX (Global X China Financials, Expense Ratio 0.65%).

Bears or aggressive hedgers in the sector may look to FAZ (Direxion Daily Financial Bear 3X Shares, Expense Ratio 0.95%) which has become a rather popular short term trading vehicle (5.7 million
shares traded in ADV), SEF (ProShares Short Financials, Expense Ratio 0.95%), SKF (ProShares UltraShort Financials, Expense Ratio 0.95%) and FINZ (ProShares UltraPro Short Financials, Expense Ratio 0.95%), which deliver 1X short leverage, and 2X and 3X daily inverse leverage to U.S. Financials respectively. All three of these funds remain rather small in terms of asset size and daily turnover in comparison to Direxion’s FAZ.

Direxion Daily Financial Bull 3X Shares

For more information on Street One ETF research and ETF trade execution/liquidity services, contact Paul Weisbruch at pweisbruch@streetonefinancial.com.

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