A Targeted ETF Idea for a hot Sector

The financial services sector, the second-largest sector allocation in the S&P 500, has been one of the most obvious beneficiaries of Donald Trump’s stunning ascent to the White House. That trend is benefiting exchange traded funds beyond the traditional, diversified ETFs providing broad-based financial services exposure.

That includes the First Trust NASDAQ ABA Community Bank Index Fund (NasdaqGM: QABA), which is up 57.5% over the past year.

The Trump administration’s expansionary policies would be especially beneficial for banks since the segment is sensitive to the overall economy. Moreover, the expansionary policies have fueled bets of increased Federal Reserve interest rate hikes to rein in a potentially overheating economy and rising inflation, which further supports lending revenue and their bottom line among bankers and insurers.

Smaller banks could find relief as the Trump administration rolls back strict regulatory reforms imposed on the financial sector, including the infamous Dodd-Frank Act.

Dodd-Frank imposed a number of restrictions on the financial sector, and industry observers contended that the new regulations forced on an unequally high burden on smaller banks, which has contributed to slow returns among mid- to small-sized banks.