Investors’ Contempt For Bank Stocks Could Lift These ETFs

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January 2, 2019 1:18pm NYSE:FAZ

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From Todd Shriber: The number of investors that like bank stocks and the related exchange traded funds are rapidly dwindling as the financial services sector ranks as one of this year’s worst-performing groups in the S&P 500.


The Financial Select Sector SPDR XLF 0.42%, the largest ETF dedicated to financial services stocks, and the SPDR S&P Regional Bank ETF KRE 1.03% are epic disappointments this year as highlighted by an average year-to-date loss of 18.52 percent for the two funds.

What Happened

Data suggests that investors are not waiting around for XLF and KRE to rebound

“Outflows from the $21 billion Financial Select SPDR Fund, or XLF, are driving the record $9.2 billion that’s been pulled from all ETFs tracking financials this year,” reports Bloomberg. “Traders have also been closing out their bets in the $2.7 billion SPDR S&P Regional Banking ETF, which tracks an equal-weighted portfolio of banks stocks. XLF is more diversified, with 49 percent of its holdings in banks, and about 32 percent in insurance companies.”

Why It’s Important

Risk-tolerant traders can exploit an ongoing weakness in the financial services sector with several inverse leveraged ETFs, including the Direxion Daily Financial Bear 3X Shares FAZ 0.15%. FAZ looks to deliver triple the daily inverse performance of the Russell 1000 Financial Services Index.

Underscoring the weakness in financials, FAZ finished 2018 with a month-to-date gain of just over 35 percent, making it the eighth-best bearish fund in Direxion’s lineup this month, according to issuer data.

While $4.53 billion has departed XLF this quarter, more than any other ETF, traders have also pulled $41.24 million from the bearish FAZ, indicating some profit-taking in that triple-leveraged ETF.

What’s Next

As noted earlier, regional bank stocks are tumbling as well, a major disappointment when considering that group usually follows Treasury yields higher.

The Direxion Daily Regional Banks Bear 3X Shares WDRW 5.7%, the only triple-leveraged inverse ETF targeting regional banks, is surging. WDRW, which tries to deliver triple the daily inverse performance of the S&P Select Regional Bank Index, ended December up nearly 60 percent, easily making it the best-performing bearish Direxion fund on a month-to-date basis.


The Direxion Daily Financial Bear 3x Shares (FAZ) was trading at $13.60 per share on Wednesday afternoon, up $0.03 (+0.22%). Year-to-date, FAZ has gained 16.51%, versus a -6.01% rise in the benchmark S&P 500 index during the same period.

FAZ currently has an ETF Daily News SMART Grade of D (Sell), and is ranked #17 of 48 ETFs in the Inverse Equities ETFs category.


This article is brought to you courtesy of Benzinga.


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