ETFdb Logo
ETFdb Logo
  • ETF Database
  • Channels
    • Themes
      • Active ETF
      • Artificial Intelligence
      • Beyond Basic Beta
      • China Insights
      • Climate Insights
      • Core Strategies
      • Crypto
      • Direct Indexing
      • Disruptive Technology
      • Energy Infrastructure
      • ETF Building Blocks
      • ETF Investing
      • ETF Education
      • ETF Strategist
      • Financial Literacy
      • Fixed Income
      • Free Cash Flow
      • Innovative ETFs
      • Institutional Income Strategies
      • Leveraged & Inverse
      • Managed Futures
      • Market Insights
      • Modern Alpha
      • Multifactor
      • Responsible Investing
      • Retirement Income
      • Tax Efficient Income
    • Asset Class
      • Equity
        • U.S. Equity
        • Int'l Developed
        • Emerging Market Equities
      • Alternatives
        • Commodities
        • Gold/Silver/Critical Minerals
        • Currency
        • Volatility
      • Fixed Income
        • Investment Grade Corporates
        • US Treasuries & TIPS
        • High Yield Corporates
        • Int'l Fixed Income
    • ETF Ecosystem
    • ETFs in Canada
  • Tools
    • ETF Screener
    • ETF Country Exposure Tool
    • ETF Sector Tracker Tool
    • ETF Database Categories
    • Head-To-Head ETF Comparison Tool
    • ETF Stock Exposure Tool
    • ETF Issuer Fund Flows
    • Indexes
    • Mutual Fund To ETF Converter
  • Research
    • ETF Education
    • Equity Investing
    • Dividend ETFs
    • Leveraged ETFs
    • Inverse ETFs
    • Index Education
    • Index Insights
    • Top ETF Sectors
    • Top ETF Issuers
    • Top ETF Industries
  • Webcasts
  • Themes
    • AI ETFs
    • Blockchain ETFs
    • See all Thematic Investing ETF themes
    • ESG Investing
    • Marijuana ETFs
  • Multimedia
    • ETF 360 Video Series
    • ETF of the Week Podcast
    • ETF Prime Podcast
    • Video
  • Company
    • About VettaFi
    • Get VettaFi’ed
  • PRO
    • Pro Content
    • Pro Tools
    • Advanced
    • FAQ
    • Pricing
    • Free Sign Up
    • Login
  1. Core Equity Channel
  2. How This S&P 500 ETF Strategy Avoids Downtrodden Financial Sector
Core Equity Channel
Share

How This S&P 500 ETF Strategy Avoids Downtrodden Financial Sector

Aaron NeuwirthAug 15, 2019
2019-08-15

In an environment of falling interest rates, concerns over a global slowdown and rising risks in financial markets, the banking sector has been among the worst performers this year. ETF investors, though, can look to a strategy that captures U.S. market exposure without the exposure of a weakening financial segment.

Bank shares started to lose ground this month after President Donald Trump unexpectedly threatened new tariffs on China, the Wall Street Journal reports. The threat triggered a broad selloff and raised bets that the Federal Reserve would keep cutting interest rates to bolster U.S. economic growth.

However, the lower rate outlook has weighed on banks since they can’t make as much money from lending at lower rates.

The KBW Nasdaq Bank Index has retreated 9.4% this month, compared with a smaller dip of 3.3% in the S&P 500.

“If a [half percentage-point]cut in September were to occur it would set up the sector for a particularly weak Q4,” analysts at UBS Group AG said in a recent report, adding that bank stocks could begin to look attractive again by mid-2020 if yields don’t continue to fall.

The fall in yields as a response to heightened global risk and a lower interest rate outlook has even raised the prospects of negative rates if conditions continue to deteriorate, similar to what has already occurred in some European countries. Not surprisingly, European banks have also taken a beating in response to their negative rate environment.

Broad market exposure while excluding financial sector

Investors, though, can still maintain broad market exposure while excluding the financial services sector through something like the ProShares S&P 500 Ex-Financial ETF (SPXN B+). SPXN follows the S&P 500 Ex-Financials & Real Estate Index.

“An investment in the S&P 500 that excludes a particular sector gives you the flexibility to tailor your core U.S. equity exposure,” according to ProShares. “It can replace a traditional S&P 500 fund, allowing you to underweight or even eliminate a sector in your portfolio.”

Related: 17 Highly Targeted Sector ETFs for Late Business Cycle

Looking at SPXN’s holdings when compared to the S&P 500, the ex-financial ETF, like the name suggests, holds 0% in financial sector names but would overweight other sectors instead. For instance, SPXN includes a 25.6% tilt toward information technology, 17.0% to health care and 12.2% to consumer discretionary, compared to the S&P 500’s 21.4% information technology, 14.2% health care, 13.1% financials, and 10.2% consumer discretionary.

For more market trends, visit ETFdb.com.


Content continues below advertisement

Loading Articles...
Our Sites
  • VettaFi
  • Advisor Perspectives
  • ETF Trends
Tools
  • ETF Screener
  • Mutual Fund to ETF Converter
  • Head-To-Head ETF Comparison
  • ETF Country Exposure Tool
  • ETF Stock Exposure Tool
  • ETF Database Pro
More Tools
  • Financial Advisor & RIA Center
Explore ETFs
  • ETF News
  • ETF Category Reports
  • Premium Articles
  • Alphabetical Listing of ETFs
  • Browse ETFs by ETF Database Category
  • Browse ETFs by Index
  • Browse ETFs by Issuer
  • Compare ETFs
Information
  • Contact Us
  • Terms of Use and Privacy Policy
  • © 2023 VettaFi LLC. All rights reserved.

Advertisement

Is Your Portfolio Positioned With Enough Global Exposure?

ETF Education Channel

How to Allocate Commodities in Portfolios

Tom LydonApr 26, 2022
2022-04-26

A long-running debate in asset allocation circles is how much of a portfolio an investor should...

Core Strategies Channel

Why ETFs Experience Limit Up/Down Protections

Karrie GordonMay 13, 2022
2022-05-13

In a digital age where information moves in milliseconds and millions of participants can transact...

}
X