Democrats and Republicans may not see eye-to-eye on Capitol Hill, but on Wall Street, they can agree on financial stocks. Meanwhile, retail investors can also capitalize on the millionaire politicos’ bets through broad financial sector exchange traded funds.
For instance, the Financial Select Sector SPDR (NYSEArca: XLF) tracks the S&P Financial Select Sector Index, which is comprised of S&P 500 financial stocks. The iShares U.S. Financials ETF (NYSEArca: IYF) follows a similar group but reflects the performance of the Dow Jones U.S. Financial Index. Additionally, the Vanguard Financials ETF (NYSEArca: VFH) tracks the MSCI US Investable Market Index Financials 25/50, which takes a broader exposure to the industry, including mid- and small-cap companies.
Over the past three months, XLF added 1.5%, IYF gained 1.3% and VFH returned 1.3%.
Both Republican and Democratic millionaires are bullish on financial stocks, reports Eric Rosenbaum for CNBC. Additionally, investors on both sides of the political fence are reducing exposure to the tech sector.
Specifically, according to the CNBC Millionaire Survey, 32% are in financial stocks, compared to 21% in October 2014. Meanwhile, millionaires have cut exposure to tech stocks to 13% from 21%.
“I don’t think political leanings have a lot to do with how people invest. People invest based on their wallet,” Tom Wynn, director of affluent research at Spectrem Group, said in the article. “As the economy grows, banks and financials are more busy.”
Looking ahead, millionaires have an optimistic outlook on the financial sector, with 23% of those surveyed anticipating the sector to see the greatest amount of their investment dollars this year, compared to 14% in October. Meanwhile, the well-off investors are expected to diminish tech exposure to 14% from 19%.
To get a sense of their allocations, Democratic millionaires project a 31% allocation to financials in 2015, whereas Republican investors anticipate a 16% tilt, or slightly ahead of the 15% weight in tech stocks for the remainder of the year.
The investment theme suggests that more wealthy investors are more value-oriented rather than growth-oriented at the moment. Wynn argues that affluent investors tend to tilt toward financials during periods of economic optimism. For instance, 49% of those surveyed expect the economy to be stronger by the end of the year, compared to 42% in October.
Additionally, historical data suggests that bank stocks could outperform in a rising rate environment ahead. [Uptick in Rates is a Boon for Bank ETFs]
For more information on the financials sector, visit our financial category.
Max Chen contributed to this article.