Looking at first-quarter earnings, markets are higher. BlackRock and banks like Bank of America (BAC), JP Morgan (JPM), and Goldman Sachs (GS) beat expectations. ETF Trends CEO Tom Lydon was on hand for Fox Business’ “Mornings with Maria” to discuss what is being seen in the banking space.
As Lydon explains, it is a great week for banks. There’s a loan loss reserve returning to investors, which has helped. Industry leaders like Bank of America have stepped up with a stock buy-back program. Money is being distributed on the lending and the investment sides.
At the same time, rates are starting to climb as well. The treasury yield has tripled since August 2020, which is something to keep an eye out on.
“If you’re investing for rising rates, these big banks are strong but look at some of the regional banks that have more profits based on lending. The SPDR S&P Regional Banking ETF (KRE) is a great ETF to take a look at, where you can actually profit from regional lending, as opposed to more on the investment side. Definitely, something to consider,” Lydon states.
Regionals have really been a main talking point. As noted, smaller banks have more revenue from lending, and rates rising creates more profits. As a result, mortgages are in demand as rates are rising.
This also brings to mind the VictoryShares USAA MSCI USA Small Cap Value Momentum ETF (USVM). The fund is a great play that ticks all the boxes for the current market environment. It helps investors focus on small-capitalization stocks that benefit from the early stages of economic recovery. Additionally, it captures the shift toward the value style, notably those enjoying rising momentum.
Lydon added that “Stocks’ performance remains bifurcated. As the economy gets back on track and returns to normal, we see a shift toward more economically sensitive sectors and more cheaply valued segments of the market that got left out of last year’s recovery rally.”
For more market trends, visit ETF Trends.