As the markets move and traders ride the momentum, the increased trading activity could help bolster investment banks and brokerage related exchange traded funds.
J.P. Morgan Chase & Co.’s corporate and investment banking head Daniel Pinto projects trading activity to rise by over 10% in the second quarter year-over-year, reports Emily Glazer for the Wall Street Journal.
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Pinto revealed that the bank has seen higher client activity in fixed income but slightly lower equities client activity. After the a particularly weak second quarter of 2015, he believes the banks’ trading activity will have a percentage increase in the “mid-teens” in the upcoming quarter.
“As markets recover [FICC] will play extremely well,” Pinto said, referring to fixed income, currencies and commodities.
Pinto also added that pieces of the business rise and fall through the cycle. For example, rates in the past 12 months have performed well, along with some portions of emerging markets, whereas credit has been “a bit sluggish.”
[related_stories]Bank of America Corp. CEO Brian Moynihan also expects trading activity to rise in the second quarter, pointing to “solid” trading in April and May after a disappointing first quarter, reports Christina Rexrode for the Wall Street Journal. Looking ahead, Moynihan estimates trading revenue to rise by mid-single digits in the second quarter year-over-year, with higher revenue in fixed-income trading division.
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The pick up in trading activity could help bolster the broker-dealer segment of the financial industry.
Over the past month, the iShares US Broker-Dealers & Securities Exchanges ETF (NYSEArca: IAI) rose 5.9% while the SPDR S&P Capital Markets ETF (NYSEArca: KCE) gained 6.5%.
IAI provides exposure to U.S. investment banks, discount brokerages and stock exchanges, including prominent names like Goldman Sachs (NYSE: GS) 10.5%, Morgan Stanley (NYSE: MS) 9.1%, Charles Schwab (NYSE: SCHW) 8.8%, Intercontinental Exchange (NYSE: ICE) 8.4 and CME Group (NYSe; CME) 8.0%.
KCE, an equal-weight rival to IAI, leans toward more small- and mid-cap companies. The fund’s top holdings include SEI Investments (NasdaqGS: SEIC) 3.3%, LPL Financial Holdings (NasdaqGS: LPLA) 3.2% and Stifel Financial (NYSE: SF) 3.2%.
For more information on the financial sector, visit our financial category.
iShares US Broker-Dealers & Securities Exchanges ETF