A number of key factors have begun to line up, making financials stocks highly sought after for investors in this current macroeconomic environment.
Rising interest rates in North America have spurred financial institutions higher in Canada and the U.S. markets, and while the continent’s largest banks are widely considered to be solid plays moving forward, concerns that much of the forward momentum these institutions are likely to display may be priced in to these companies’ stock prices has some wavering on the fence, unwilling to enter this space at this point in time.
Enter regional banks in the U.S. market. Regional players operate in the same macreconomic environment as their larger peers, making the recently announced tax cuts very beneficial to the bottom lines of these firms.
Additionally, while competition remains fierce among many of the larger players in the U.S. market, smaller regional players have generally done a very good job of insulating themselves in niche markets where these lenders are able to extract additional value from their long-term client base than their larger peers, on average, making this sector very attractive from a bottom-up perspective.
One exchange traded fund (ETF) which takes advantage of regional plays in the U.S. market is the PowerShares KBW Regional Banking Portfolio ETF (KBWR).
This ETF is designed to track the broader regional banking index in the United States, and has seen an increase of approximately 6% year to date, which is a very decent return for investors given the fact we are not yet through the first quarter of this year. I would encourage investors looking to invest in this broad sector to consider this ETF as an option moving forward.
Invest wisely, my friends.
