National Cybersecurity Awareness Month concluded at the end of October, but that doesn’t mean that corporations and governments suddenly have the luxury of sleeping on cybersecurity capital expenditures.
Now more than ever, companies and governments need to prioritize cybersecurity spending. Obviously, that’s a plus for exchange traded funds such as the First Trust Nasdaq Cybersecurity ETF (CIBR). Some sectors more than others really need to up their cyber defenses, and that bolsters the case for assets like CIBR because some of those groups have the cash and obvious need to spend on cybersecurity. That includes financial services.
“Our survey of 88 banks globally confirms that larger banks – whether measured by assets, employees or revenue – make greater investments in cyber defenses,” according to Moody’s Investors Service. “Banks that handle extensive customer and proprietary data, that are custodians of customers’ wealth and that facilitate transactions across payments networks are critical infrastructure and ripe targets for cyberattacks.”
CIBR, which tracks the Nasdaq CTA Cybersecurity Index, often proves responsive to cyberattacks, and that notion is on display this year, highlighted by a 26.43% year-to-date gain for the largest cybersecurity ETF by assets.
Good news: Spending is an equally, if not more, credible catalyst for long-term CIBR upside than headlines about specific cybercrimes, and banks are going to play marquee roles in those expenditures.
“Accordingly, these institutions have been leaders in enhancing cyber strategy and investing in cyber defenses, processes and talent,” adds Moody’s. “Investment in cybersecurity is on the rise across most banks we surveyed, and is independent of the bank’s comparative credit strength and track record of managing asset risk.”
Whether it’s recent cyberattack headlines or expectations of long-term spending or both, investors are displaying enthusiasm for CIBR. On October 22, the First Trust ETF had $5.31 billion in asset under management. As of November 12, that figure swelled to $5.83 billion, according to issuer data.
As for banks, it’s clear that the industry could have meaningful implications for cybersecurity stocks and CIBR over the long haul.
“About 75% of respondents have standalone cyber insurance with coverage on business interruption, legal settlements, regulatory fines and ransom payments,” concludes Moody’s. “Most banks say they use multiple cloud infrastructure providers and that they expect to grow their adoption of private and public cloud services.”
For more news, information, and strategy, visit the Nasdaq Portfolio Solutions Channel.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.