The financial sector has been one of the hardest hit as stay-at-home orders across the nation are forcing places like banks to readjust their businesses in order to keep pace with the social distancing laws amid the coronavirus outbreak. Can the sector weather this storm?
“The financial services sector is currently facing challenges on multiple fronts: banks have reduced their opening hours and in many cases can only serve a few customers at a time due to social distancing rules, putting additional strain on channels like telephone service, online banking and social media,” an Econsultancy report noted. “At the same time, record numbers of consumers are frantically trying to contact their bank with questions, concerns or to request special measures as their finances have been impacted by the fallout from the coronavirus – many have lost jobs, seen their incomes vanish, and are in fear of defaulting on loans or missing mortgage payments. Businesses, too, are in need of additional help as many have seen their revenue drop dramatically or dry up altogether.”
Even the financial technology (fintech) space is facing its own unique set of challenges.
“Meanwhile, fintech firms may be facing a drop in demand as customers opt for safer, more predictable investments in the current fraught environment, although some will be well-placed to benefit from the increased demand for online and mobile banking and payments,” the report added. “Many are even offering their services to consumers and businesses for free while the coronavirus crisis is ongoing.”
For financial sector bulls, this could boost the Direxion Daily Financial Bull 3X ETF (NYSEArca: FAS), which seeks daily investment results worth 300 percent of the daily performance of the Russell 1000 Financial Services Index. The index is a subset of the Russell 1000 Index that measures the performance of the securities classified in the financial services sector of the large-capitalization U.S. equity market.
Trader who are sensing an opportunity to play the inverse side for bearishness can look at the Direxion Daily Financial Bear 3X ETF (NYSEArca: FAZ), which seeks daily investment results that equate to 300% of the inverse of the daily performance of the Russell 1000® Financial Services Index. The index is a subset of the Russell 1000® Index that measures the performance of the securities classified in the financial services sector of the large-capitalization U.S. equity market.
Fintech ETF Plays to Consider
ETFs to look at in the growing fintech space include the Global X FinTech ETF (NasdaqGM: FINX) and the ARK Fintech Innovation ETF (NYSEArca: ARKF). ARKF invests in equity securities of companies that ARK believes are shifting financial services and economic transactions to technology infrastructure platforms, ultimately revolutionizing financial services by creating simplicity and accessibility while driving down costs.
FINX seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of the Indxx Global Fintech Thematic Index. The underlying index is designed to provide exposure to exchange-listed companies in developed markets that provide financial technology products and services, including companies involved in mobile payments, peer-to-peer (P2P) and marketplace lending, financial analytics software, and alternative currencies, as defined by the index provider.
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