Inflows to bank ETFs are impactful and a theme investors should monitor.

“We again found that ETF flows meaningfully impacted the dollar volume traded of underlying
component stocks,” according to a KBW note posted by Crystal Kim of Barron’s. “We reviewed our research coverage universe and found that on average, these 90 ETFs drove about 11% of total dollar volume traded since Election Day. At a maximum, we found these ETFs drove about 34% of a financial component’s dollar volume traded since Election Day.”

XLF is coming off one of its best annual performances since the global financial crisis. While the financial services sector, the second-largest sector allocation in the S&P 500, has some doubters after last year’s impressive rally, some market observers believe the sector can keep tracking higher this year.

Year-to-date, investors have added over $1.6 billion in new money to XLF while VFH has seen inflows of more than $632 billion.

For more information on the financial sector, visit our financial category.