XLF (SPDR Financial Select Sector, Expense Ratio 0.14%) is by far the most seasoned and largest ETF in the segment having debuted nineteen years ago this December 16th, and the fund has packed in more than $1.1 billion in new assets via creation flows in recent sessions on the significant move higher in the sector since December began.
XLF has a massive edge over the next largest ETF in the segment which happens to be the $7.1 billion VFH (Vanguard Financials, Expense Ratio 0.10%). The third largest ETF in the segment, KRE (SPDR S&P Regional Banking, Expense Ratio 0.35%), has also noticeably participated in the recent rally accompanied by inflows which has been the December theme thus far in Financials, helping this fund creep closer to the $5 billion mark.
Earnings season in this space does not really kick off until after the new year, with top XLF components slated to report as follows: 1) BRK.B (11.13%, 2/2/18), 2) JPM (10.90%, 1/11/18), 3) BAC (8.30%, 1/12/18), 4) WFC (7.72%, 1/12/18), and 5) C (6.07%, 1/11/18).
Market participants seem to believe that the early December rally in the segment has legs and are pointing to the Brexit “divorce” agreement that has been progressing between the U.K. and The European Union a yet another reason that the sector should be rallying as it has in terms of European banks, and U.S. based banks that do business in Europe. The prospect of a new Fed Chair in Jerome Powell, whom takes the reins from Janet Yellen next year, as well as potentially higher interest rates in the marketplace understandably make the Financials sector ripe for future volatility and trading opportunities as it pertains to not only the large Money Center and International banks but related segments of the market such as the Regional Banks (such as KRE mentioned above).
KRE for example has much different exposure as would be expected than say XLF or VFH, with top holdings as follows: 1) SIVB (3.27%), 2) CMA (2.99%), 3) RF (2.94%), 4) CFG (2.88%), and 5) STI (2.86%). Finally, the Brexit “divorce” that we mentioned above has us watching the $2 billion EUFN (iShares MSCI Europe Financials, Expense Ratio 0.48%) with extreme interest in the near term.
The Financial Select Sector SPDR Fund (XLF) was trading at $27.86 per share on Friday morning, up $0.02 (+0.07%). Year-to-date, XLF has gained 20.71%, versus a 19.64% rise in the benchmark S&P 500 index during the same period.
Disclaimer: The content of this article is excerpted from a daily newsletter from Street One Financial. While ETF Daily News may edit the contents and add a relevant title to the piece, the author, Paul Weisbruch, does not endorse or recommend any issuer or security mentioned herein.
Paul Weisbruch is the VP of ETF/Options Sales and Trading at Street One Financial. Prior to joining the team at Street One, Paul served as the Director of RIA and Institutional ETF Sales at RevenueShares ETFs from December 2007 until November of 2009. Before RevenueShares, Paul was employed by Susquehanna International Group from 2000 until 2007 serving in roles including OTC/NYSE Institutional Block Trading, Nasdaq/OTC Market Making, ETF/Derivatives Intelligence and Strategy, Algorithmic Trading, as well as acting as the PHLX Floor Specialist in the ETFs, SPY and DIA.Paul has been actively involved in the ETF space from both a product and trading standpoint since 2000. Additionally, Paul has well forged relationships with national RIAs, institutional pension fund managers and consultants, mutual fund and hedge fund managers, and also the ETF media. Co-authoring the “S1F ETF Daily” since 2009, the daily piece has become a must for many portfolio managers in the ETF space, with segments regularly appearing in the likes of Barron’s, WSJ, and ETFTrends.com for instance.
He holds his Series 4 (Registered Options Principal), 6, 7, 55 (Equity Trader), 63, and 65 licenses. He graduated from the University of Pittsburgh (B.S. – Economics), graduating magna cum laude, and has an MBA from Villanova University.