Looking ahead, Fidelity Investments anticipates growing regulatory relief, especially under the Trump administration, to bolster bank earnings and strengthen the financial sector.
“Estimates are that big banks with more than $50 billion in assets—which have seen a disproportionate share of the incremental regulations—could be among the biggest beneficiaries, with an estimated 5% to 15% boost in earnings. Regional banks, which have tried not to exceed the onerous $50 billion threshold, could become more interested in mergers and acquisitions (M&A), and investment banks could benefit from increased trading activity,” Christopher Lee, Sector Portfolio Manager for Fidelity Investments, said in a note.
Meanwhile, innovative technologies and further developments, such as 3D-sensoring smartphone applications and more, may continue to support the information technology segment.
“I see Apple as a driver of innovation, but I believe investments in certain component manufacturers may offer compelling growth opportunities going forward,” Charlie Chai, Sector Portfolio Manager for Fidelity Investments, said in a note. “These are the companies that make the camera lenses, sensors, speakers, illuminators, microphones and other products required for smartphone operation, and the use of features such as 3D sensing. I believe the best-positioned component makers represent attractive investment opportunities in the coming year, regardless of which company ultimately wins the smartphone race.”
Along with financial and technology exposure through the dividend-focused FDVV, ETF investors may also consider sector-specific plays, such as the Fidelity MSCI Financials Index ETF (NYSEArca: FNCL) and the Fidelity MSCI Information Technology Index ETF (NYSEArca: FTEC) to access the relative market segments. FNCL shows a 1.46% 12-month yield and FTEC has a 0.92% 12-month yield.