Looking for a U.S. Financials ETF? Look No Further

Investors looking to gain exposure to U.S. financials have a range of options available to them, from individual bank stocks, to insurance & life institutions, credit unions, and exchange traded funds (ETFs).

In this article I’m going to discuss one ETF which has performed quite well over the past year, increasing more than 47% based on the stock’s trailing 12-month performance.

The BMO Equal Weight U.S. Bank Index ETF (TSX:ZBK) is an ETF which tracks the broader U.S. financials sector, giving investors access to a basket of securities comprising a snapshot of the entire industry.

This ETF has done very well since the November election in the U.S., and has plateaued of late, however, analysts believe that the U.S. financials sector should outperform for the remainder of the year for a number of reasons.

First, U.S. financials should experience broad growth from continued strengthening in U.S. lending as well as higher interest rates as the Fed continues to hike rates into the latter half of 2017 and 2018.

The lending environment in the U.S. has generally improved to pre-recession conditions, with a decent amount of growth expected for the second half of this year.

Secondly, many investors have begun to steer clear of Canadian financials of late, with Canada’s biggest banks receiving ratings downgrades from most ratings agencies due to increased risk related to Canada’s housing sector, as well as risks related to oil prices and a continued softening of the oil & gas sector in Canada.

One note: this ETF is also available in a hedged version, to reduce some of the foreign exchange rate currency risk from buying into this ETF.