By Mark DeCambre
Hello, again : Quick! What’s the best performing sector among the S&P 500’s /zigman2/quotes/210599714/realtime SPX +0.25% 11 this week? It’s financials (with materials right behind). Incidentally, financials are also the best performing sector so far in August, up over 5%, with Morgan Stanley /zigman2/quotes/209104354/composite MS +0.37% , JPMorgan Chase /zigman2/quotes/205971034/composite JPM +0.24% and Goldman Sachs Group /zigman2/quotes/209237603/composite GS -0.36% helping to drive up values in exchange-traded funds that offer exposure to the sector.
Investors are betting heavily on the banking sector’s rebound in the economic recovery from COVID-19 and that is showing up in ETF moves this week with the Invesco KBW Bank ETF and SPDR S&P Regional Banking ETF . Check out ETF Wraps table of top performers this week below. The outperformance by financial ETFs come even as interest rates haven’t necessarily cooperated.
Rising interest rates are good for bank profitability but currently the 10-year Treasury note /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y 0.00% , used to price everything from mortgages to car loans, is hanging around 1.35%. Banks borrow using short-term debt and lend on a longer-term basis. Longer-dated rates are expected to eventually head higher and the economy is also expected to benefit from a fuller recovery if the delta variant doesn’t derail that.
We’ll also talk a little about the playbook for new infrastructure legislation, bets on small-caps versus large and the power move by JPMorgan Chase into ETFs.
As per usual, send tips, or feedback, and find me on Twitter at @mdecambre to tell me what we need to be jumping on. Sign up here for ETF Wrap.
JPM & ETFs
A recent announcement by JPMorgan Chase that it would convert a chunk, some $10 billion, of its actively managed mutual funds into ETFs is rippling through the fund market. Todd Rosenbluth, head of ETF and mutual fund research at CFRA says that JPMorgan is currently ranked No. 9 as of 2020 (it is currently No. 7), but could be near the top of ETF providers in the coming half decade.
“JPMorgan could be a top 5 provider in the next five years,” Rosenbluth told ETF Wrap.
The move comes as fund providers are increasingly restructuring mutual funds into ETFs because of the increased interest in the benefits of the ETF wrapper, including tax-efficiencies and transparency.
Rosenbluth notes, however, that JPMorgan’s tactic is different from competitors, like American Century and Fidelity, who recently launched semi-transparent ETFs under the same name as popular mutual funds.
Overall, the CFRA analyst says that actively managed ETFs have been drawing a lot of interest, pulling in $38 billion year-to-date through Aug. 10, according to CFRA data.
The good and the bad
|Top 5 gainers of the past week||%Return|
|SPDR S&P Metals & Mining ETF /zigman2/quotes/209640763/composite XME||8.5|
|Amplify Transformational Data Sharing ETF /zigman2/quotes/204122720/composite BLOK||6.4|
|Invesco KBW Bank ETF /zigman2/quotes/202716924/composite KBWB||5.9|
|SPDR S&P Regional Banking ETF /zigman2/quotes/200108291/composite KRE||5.2|
|SPDR S&P Bank ETF /zigman2/quotes/201006419/composite KBE||5.1|
|Source: FactSet, through Wednesday, Aug. 11, excluding ETNs and leveraged products . Includes NYSE, Nasdaq and Cboe traded ETFs of $500 million or greater|
|Top 5 decliners of the past week||%Return|
|Aberdeen Standard Physical Silver Shares ETF /zigman2/quotes/207011629/composite SIVR||-6.3|
|iShares Silver Trust /zigman2/quotes/205744453/composite SLV||-6.3|
|ARK Genomic Revolution ETF /zigman2/quotes/206454610/composite ARKG||-6.1|
|Invesco DWA Healthcare Momentum ETF /zigman2/quotes/205286687/composite PTH||-5.3|
|iShares MSCI Global Gold Miners ETF /zigman2/quotes/208061034/composite RING||-4.8|
Visuals of the week
Instinet’s Frank Cappelleri, a technical analyst, notes that the Utilities Select Sector SPDR Fund /zigman2/quotes/206645117/composite XLU 0.00% hit a 52-week high on Wednesday. However, the technician notes that Treasury yields, although elevated of late, haven’t necessarily confirmed the move in utilities, which historically have tended to rise along with fixed income assets like the benchmark 10-year Treasury /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y 0.00% , for example.