As with most sectors, 2019 saw the financial sector manage strong gains amid the U.S.-China trade war, but with a murky outlook to start 2020, it could mean looking into niche areas for investors. ETF investors, in particular, they can look to financial technology (fintech) funds that can capitalize on innovation in the sector.
“Last year saw the sector pushed and pulled by factors including three Federal Reserve rate cuts, waffling on the U.S.-China trade deal and weak but eventually improving economic data from some of the world’s largest economies,” wrote Maya Sasson in Kiplinger. “Financial stocks still managed a 29% gain amid the turmoil.”
“But 2019 might seem like a cakewalk compared to what’s ahead. Low interest rates still are hampering commercial banks, and no one is quite sure what’s in store from the Fed,” Sasson added. “Meanwhile, the U.S. and China have a much more difficult path to finish the job started by their “phase-one” trade deal, and the 2020 election cycle will have Wall Street guessing all year at whether bank stocks will enjoy another accommodative presidential term.”
The payment processing space is seeing a growing number of big bets placed by venture capitalists, which could give financial technology ETFs a boost. It’s a $1.9 trillion industry that the largest tech firms are trying to tap into.
Fintech ETF Options
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.
Trading the Financial Sector with Juice
Traders who want to leverage the strength in the financial sector can look to funds like the Direxion Daily Financial Bull 3X ETF (NYSEArca: FAS). As for FAS, the fund seeks daily investment results, before fees and expenses, of 300% of the daily performance of the Russell 1000® Financial Services Index.
On the opposite end of the spectrum, traders can opt for the Direxion Daily Financial Bear 3X ETF (NYSEArca: FAZ). FAZ seeks daily investment results that equate to 300% of the inverse (or opposite) of the daily performance of the Russell 1000® Financial Services Index.
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