U.S. equities are on their way toward the ninth year of an extended bull market rally that has elevated valuations in many segments of markets. Nevertheless, exchange traded fund investors may still find some opportunities in some targeted sectors.
Ford O’Neil, manager of the Fidelity Total Bond Fund (FTBFX), argued that there will be opportunities financials and energy sectors, according to a Fidelity research note.
The incoming Donald Trump administration could relax some of the more burdensome regulatory challenges that banks have to put up with, such as increased capital requirements under Dodd-Frank.
“Many companies have told me that regulatory burdens are among the largest challenges they’ve had to deal with in the last eight years,” O’Neil said.
Moreover, the rising interest rate environment would also help support the banking industry’s bottom line as they generate greater revenue from loans.
O’Neil also believes that the rebounding oil prices could reinvigorate the energy sector, such as pipeline operators that have been lumped together with the broader energy segment when crude oil prices plunged.
“But I really like that industry, because regardless of where prices are, we still need to get oil and gas to utilities, LNG terminals and other destinations,” O’Neil added.
The oil services sub-sector has been particularly hard hit during the selling and have been quick to recover off strengthening crude oil prices.
ETF investors who are interested gaining exposure to these two market segments have a number of broad sector-specific ETF options to choose from. For financial sector exposure, investors an take a look at options 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).
For broad energy exposure, investors can utilize something like the Fidelity MSCI Energy Index ETF (NYSEArca: FENY). Energy Select Sector SPDR (NYSEArca: XLE), Vanguard Energy ETF (NYSEArca: VDE) and iShares U.S. Energy ETF (NYSEArca: IYE).
For more information on market sectors, visit our sector ETFs category.