“Bank stocks are also set to increase profits in a rising rate environment, and smaller regional banks that derive a larger percentage of their revenues from loans may fare better than the major banks. The SPDR S&P Regional Banking ETF (NYSEARCA: KRE), launched by SSGA in 2006, aims to reflect the performance of the S&P Regional Banks Select Industry Index, an equal-weighted index exclusively devoted to regional bank stocks that, as with the KIE fund, leans more toward smaller firms. The fund has nearly $3 billion in total assets and an average daily trading volume of roughly $200 million,” according to Investopedia.
A rising interest rate environment will throw a wrench into the financial markets. Nevertheless, bank-related exchange traded funds could weather the storm as financial firms have positioned ahead of the potential rate changes. KRE’s sensitivity to interest rates is well known.
An improving U.S. economy could foster increased borrowing and financing by businesses, large and small, across the U.S. while benign mortgage rates could also provide a lift to the mortgage lending operations of regional banks.
SPDR S&P Regional Banking ETF
