With many market participants remembering how the recent recession affected financials across the board, the idea of investing in the U.S. financials sector is one which has perhaps been avoided in recent years, to the detriment of those who have missed out on an incredible rally.
Inflation remains low, interest rates are rising, and taxes are being cut – these three levers have the potential to continue to provide momentum for U.S banks across the board, resulting in optimism among some (including myself) that this momentum is likely to continue regardless of how the economy performs in the very near term.
One exchange traded fund (ETF) which is one of the most broadly diversified and one which many money managers have pointed to as one of the best ways of gaining exposure to this sector is the Financial Select Sector SPDR Fund (NYSE:XLF).
This fund has outperformed the majority of its peers over the last year, buoyed by a number of tailwinds which may not dissipate for quite some time.
The fundamentals of the U.S. banking sector are generally superior to many other nations globally, and with the potential for a steepening yield curve bolstering the long-term outlooks of many in financial circles, picking up shares of XLF may be an excellent play for investors in the short, medium, and long-term.
In the financials sector, one which is very nuanced and structured as an oligopoly of sorts, an ETF may be one of the best ways of buying into financials at this point in time to minimize risk and maximize long-term returns.
Invest wisely, my friends.
