Now two weeks removed from Election Day, it is not a stretch to say one of the safest spaces of all has been the U.S. equity market. Those looking for tactical safer spaces can certainly find them with myriad sector and industry exchange-traded funds with much of that safety coming from financial services ETFs.
The Financial Select Sector SPDR Fund
Insurance Stocks And ETFs
Within the financial services space, insurance stocks and ETFs were surprising leaders while the broader sector dithered for much of this year. The theme of insurance strength has continued following Election Day, as highlighted by a November gain of 8.5 percent for the SPDR S&P Insurance ETF
IAK is a cap-weighted fund while KIE is an equal-weight ETF. Much of the market's ebullience toward insurance ETFs is also attributable to a more sanguine regulatory under Trump.
“Broad financial industry deregulation under the Trump administration would ease regulatory burdens for large insurance companies while macroeconomic trends resulting from shifting global and economic policies could have a significant impact on profitability, premium growth and investment performance,” said
ETFs such as KIE could be further bolstered into year end if the Federal Reserve moves forward with an interest rate increase at its December meeting.
Insurance ETFs' rising rates advantage is tied to the strong dollar. The stronger greenback effects an array of sectors and industry groups, but not insurance companies because U.S.-based insurance providers write the bulk of their
Insurance is the third-largest industry weight in XLF at 19.3 percent and three insurance stocks are found among the ETF's top 10 holdings.
“The potential repeal or amendment of the Dodd-Frank Act is a case in point. The designation of systemically important bank and non-bank financial institutions (SIFIs) falls under the Financial Stability Oversight Council (FSOC).
“SIFIs in the US face higher regulatory standards and three insurers — Prudential Financial Inc
“MetLife won a court ruling in March that rescinded its SIFI designation and the Trump administration may choose not to follow through on an appeal,” added Fitch.
Disclosure: Todd Shriber owns shares of XLF.
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