Already Up 35% in 2021, the DPST ETF Isn't Messing Around

Regional banking stocks have put 2020 behind them in quick fashion. Up 35% year-to-date already, the Direxion Daily Regional Banks Bull 3X Shares (DPST) is giving traders plenty to cheer about, and with the backing of analysts, the regional banking space isn’t messing around in 2021.

“In just the first few days of trading in 2021, regional bank stocks are soaring,” a Stock News article said.

One company in particular, Fifth Third Bancorp, got an upgrade from global investment firm Goldman Sachs. Per a Benzinga report, “Goldman Sachs analyst Ryan Nash upgraded Fifth Third Bancorp from Neutral to Buy and raised the price target from $29 to $35.”

“Banks will continue to deal with zero interest rates weighing on net interest margins in 2021 and beyond,” the article said. “Yet bank balance sheets will be far more healthy in 2021 than they were back in 2010 during the recovery from the last economic crisis.”

As for the fund, DPST seeks daily investment results equal to 300% of the daily performance of the S&P Regional Banks Select Industry Index. The fund invests at least 80% of its net assets (plus borrowing for investment purposes) in financial instruments and securities of the index, ETFs that track the index, and other financial instruments that provide daily leveraged exposure to the index or ETFs that track the index.

The index is a modified equal-weighted index that is designed to measure performance of the stocks comprising the S&P Total Market Index that are classified in the GICS regional banks sub-industry. Signs of life are starting to show in the fund’s YTD chart with the price moving above its 50-day moving average of late.

DPST is up over 170% in the last three months:

DPST Chart

Regional Banks Are Regaining Their Footing

Like all sectors, 2020 wasn’t kind to regional banks. Nor did it smile upon the banking industry in general. Yet 2021 is painting a picture of recovery thus far.

“The banking industry saw more than its fair share of challenges in 2020, ranging from the closure of branches due to the coronavirus pandemic, to the increased competition from non-bank fintechs,” Stock news said. “The Deloitte Center for Financial Services is estimating that the U.S. banking industry may have to provision for a total of $318 billion in net loan losses from 2020 to 2022, which would represent 3.2% of loans.”

“Last month, Fitch Ratings revised its Sector Outlook for U.S. banks from Negative to Stable for 2021, although it also pointed out that approximately 60% of U.S. bank ratings were carrying a Negative Outlook,” the article added.

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