ETF Plays That Have Benefited from a 'Trump Bump'

Donald Trump’s victory set off one of the steepest post-election rallies in recent memory. While many markets strengthened on the “Trump bump,” some segments and exchange traded funds stood out from the rest.

For instance, the S&P 500 Financials Sector, along with related ETFs like the Fidelity MSCI Financials Index ETF (NYSEArca: FNCL), Financial Select Sector SPDR (NYSEArca: XLF), iShares U.S. Financials ETF (NYSEArca: IYF) and Vanguard Financials ETF (NYSEArca: VFH), experienced a strong boost from the election amid speculation that President Trump will loosen regulations, help the economy expand and cut taxes.

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.

For target exposure to banks, the First Trust NASDAQ ABA Community Bank Index Fund (NasdaqGM: QABA), PowerShares S&P SmallCap Financials Portfolio (NYSEArca: PSCF) and PowerShares KBW Regional Bank Portfolio (NYSEArca: KBWR) include large tilts toward small- and micro-cap bank stocks.

The larger and more popular SPDR S&P Bank ETF (NYSEArca: KBE) and SPDR S&P Regional Banking ETF (NYSEArca: KRE) also include large tilts toward the small and midsized segments, along with some large-cap exposure. KBE and KRE equally weight their component holdings and have a larger weights toward mid-caps, along with large-caps.