Related: Struggle and Trouble Ahead for Bank ETFs?
Furthermore, within the financial space, insurance companies will also capitalize on rising interest rates. Insurance stocks have typically exhibited a positive correlation with interest rates where higher rates have translated to higher growth. Along with generating greater revenue through new higher yielding debt holdings in a rising rate environment, insurers may also capitalize on a healthier economic environment as consumers purchase big-tick items and buy a home, which may mean more insurance policy coverage.
A broad financial sector ETF may include some insurance exposure – XLF has 16.6% in insurance, but investors can also consider insurance sector-specific ETFs. ETF investors can use the SPDR S&P Insurance ETF (NYSEArca: KIE), iShares US Insurance ETF (NYSEArca: IAK) and PowerShares KBW Property & Casualty Insurance Portfolio (NYSEArca: KBWP) to capture broad exposure to insurance providers as interest rates rise.
SDPR Regional Banking ETF
Tom Lydon’s clients own shares of XLF.