The U.S. stock market has seen choppy trading over the past few weeks thanks to renewed geopolitical tensions in Ukraine, Russia and the Middle East. Further, growing speculation over the interest rate hike sooner than expected, slowdown in China and struggling European economy are weighing heavily on global growth.
As a result, investors are dumping riskier assets including financials and praising defensive sectors. Notably, the S&P Financial Select Sector SPDR Fund (NYSEARCA:XLF) lost 0.35% in the trailing one-month period compared to a loss of 0.18% for the broad U.S. market fund (NYSEARCA:SPY).
This is because lackluster activities at both household and corporate, high frequency trading concerns, increased regulatory scrutiny, sluggish mortgage banking activities, and a weak capital market business continue to dampen growth in the financial sector, which accounts for around one-fifth of the S&P 500 index alone.
Even a string of earnings beat by the major banking companies failed to infuse optimism into the sector. In particular, financials recorded weak earnings growth in Q2, trailing Auto (read: Banking Earnings Beats Fail to Boost Financial ETFs).
Amid this backdrop, a handful of financial ETFs have shown strong resilience to the sharp downturn in the financial space and are easily crushing the broad market fund. This is especially true as investors flocked to some stocks in the wake of robust dividend payments. The financial sector topped the list of largest dividend payers in the second quarter after utilities with annual dividend growth of 17.6%. About 88.5% of the companies in the financial sector paid dividends in the first half.
Below, we have highlighted three ETFs that are still in green and worth a look given that the current turmoil will likely continue in the days ahead.
iShares US Broker-Dealers ETF (NYSEARCA:IAI)
This fund provides exposure to the investment services corner of the broader financial sector of the U.S. economy by tracking the Dow Jones U.S. Select Investment Services Index. The product holds 22 stocks in its basket with the largest allocation going to Goldman Sachs (GS), Morgan Stanley (MS) and Schwab Charles (SCHW). These three firms collectively make up for one-fourth share in the basket.
The product is rich in AUM with nearly $220.5 million and sees moderate average daily volume of more than 85,000 shares. Expense ratio came in at 0.43%. The fund gained 2.3% in the trailing one-month period and has a decent yield of 1.31% per annum. IAI has a Zacks ETF Rank of 3 or Hold’ with High risk outlook.