The Financial Select Sector SPDR (NYSEArca: XLF), the largest financial sector exchange traded fund, has slumped in recent days, but it along with rival financial services ETFs are seen as beneficiaries of President Trump’s tax reform efforts, should those plans come to fruition.
Rivals to XLF include the Fidelity MSCI Financials Index ETF (NYSEArca: FNCL), iShares U.S. Financials ETF (NYSEArca: IYF) and Vanguard Financials ETF (NYSEArca: VFH).
In recent years, the government has taken steps that make home ownership more difficult, a policy that is seen benefiting major banks, such as those residing in the aforementioned ETFs. Under President Obama, multifamily or rental apartment living was emphasized over home ownership and some market observers believe President Trump’s tax reform efforts go even further.
“The Trump Administration, which is headed by a past multifamily builder, is furthering the Obama thrust,” said bank analyst Dick Bove in a commentary posted on CNBC. “President Trump has now offered a series of tax policies which would further tilt the government in favor of multifamily construction. The new rules would maintain the legal benefits enjoyed by existing home owners but they would dramatically change the rules for new homeowners or those who purchase another primary dwelling.”
Some strategists also argue that the financial sector may be a good area to look at this time around, given the potential for growth in a rising rate environment, along with potential tax and regulatory changes under the Donald Trump administration.