Although it is a smart beta fund, FTXO does feature some large weights to banks that hallmarks of cap-weighted funds, such as JPMorgan Chase & Co. (NYSE: JPM) and Citigroup Inc. (NYSE: C). Still, many of FTXO’s holdings are regional or super regional banks, which could position FTXO to benefit as Treasury yields climb.
Higher interest rates would help widen the difference between what banks charge on loans and pay on deposits, which would boost earnings for the financial sector. Regional banks are among the stocks most positively correlated to rising interest rates because higher rates improve net interest margins.
FTXO is up about 3% this year and resides about 7% below its 52-week high.
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